Upon learning that his auto transmission is about to fail, Ray sells his car to an unsuspecting buyer. This circumstance illustrates the

A) adverse selection problem.
B) free-rider problem.
C) moral hazard problem.
D) principal-agent problem.

Asymmetric Information

Asymmetric information occurs when one party in a transaction has more or better information than the other, leading to an imbalance in the decision-making process.

Unsuspecting Buyer

A consumer who purchases goods or services without being aware of all the relevant information, often leading to disadvantageous situations.

Auto Transmission

A type of vehicle transmission that automatically changes gear ratios as the vehicle moves, without input from the driver.