The "lemons" problem is a likely explanation for the fact that
A)for several months after it is new, the price of a car falls very little.
B)almost no one favors government-provided health insurance.
C)people in average health may be discouraged from buying health insurance by the high price.
D)employers are reluctant to monitor the activities of their workers, fearing that some of the workers may take legal action against the employers.

Question

Quizplus · Accepted Answer

The "lemons" problem refers to the idea that when there is asymmetric information between buyers and sellers, the market for goods or services may collapse. In the case of health insurance, people in better-than-average health may be hesitant to buy insurance at the same price as those in poor health, as they will not benefit from it as much. This can lead to adverse selection and the collapse of the market. Thus, this is the likely explanation for why people in average health may be discouraged from buying health insurance due to high prices.

The "Lemons" Problem Is a Likely Explanation for the Fact