(Answered) Markets with information problems will produce q, output.Markets with information problems will…

➤ Why do adverse selection and moral hazard change equilibrium output?
Adverse selection reduces traded quantity because buyers leave when average quality falls. High‑quality sellers may exit or hide quality, shrinking supply. Moral hazard alters behavior after contracting, raising costs or lowering effort. Both distort prices and contract terms, so the equilibrium output adjusts away from the social optimum.