Economics · Information Economics

Consider the following statements about asymmetric information and market failures: A. Adverse selection and moral hazard both arise from asymmetric information but differ in WHEN the information asymmetry matters (before vs after contracting). B. The Efficiency Wage Theory suggests that paying wages above the market-clearing rate can reduce shirking, so the wage-productivity relationship is not purely allocative. C. Mandatory disclosure requirements (e.g., requiring sellers to reveal product quality) can resolve adverse selection problems in principle. D. Moral hazard can be fully eliminated by writing complete contingent contracts. E. Credit rationing (Stiglitz-Weiss) occurs because raising interest rates may attract riskier borrowers (adverse selection) and encourage riskier projects (moral hazard), making it unprofitable for banks to raise rates beyond a certain point. Which statements are CORRECT?