A market will move toward buying and selling low-quality products when
A)sellers have less information than buyers.
B)costs are rising.
C)there is an adverse selection problem due to private information.
D)sellers have no understanding of product quality.

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party has more information than the other party in a transaction. In this case, the sellers have private information about the quality of their products, which creates an uneven playing field. As a result, buyers may become wary of purchasing higher-quality products and opt for lower-quality ones instead, which can lead to a market that is dominated by low-quality goods.

A Market Will Move Toward Buying and Selling Low-Quality Products