The potential for asymmetric information to bring about a general decline in product quality in an industry is known as the ________ problem.

Question

Quizplus · Accepted Answer

The problem described is the "lemons" problem, which was first identified in the used car market where buyers may be hesitant to purchase a used car due to asymmetric information about its actual quality. This can lead to a decline in overall quality in the market as sellers may be incentivized to only offer low-quality products to maximize profit.

The Potential for Asymmetric Information to Bring About a General