Which of the following product markets is most likely to be characterized by the "lemons" problem?
A)Products that are sold only during a particular season
B)Sophisticated products that are generally resold after use
C)Products whose quality can be easily judged by inspection
D)Products that are advertised heavily

Question

Quizplus · Accepted Answer

The "lemons" problem arises when there is asymmetric information between buyers and sellers about the quality of a product. Sophisticated products that are generally resold after use, such as used cars or second-hand electronics, are more likely to be subject to the "lemons" problem because buyers may have difficulty assessing the quality of the item before purchasing it. This can lead to a market where only lower quality items are available, driving down prices and reducing consumer confidence in the market.

Which of the Following Product Markets Is Most Likely to Be