The "lemons" problem is that
A)cars of verifiable high quality are withheld from the used car market
B)cars of verifiable low quality are withheld from the used car market
C)cars of unverifiable high quality are withheld from the used car market
D)cars of unverifiable low quality are withheld from the used car market

Question

​The "lemons" problem is that
A)​cars of verifiable high quality are withheld from the used car market
B)cars of verifiable low quality are withheld from the used car market
C)cars of unverifiable high quality are withheld from the used car market
D)​cars of unverifiable low quality are withheld from the used car market

Quizplus · Accepted Answer

The "lemons" problem refers to the information asymmetry that arises when buyers of used cars cannot determine the true quality of the vehicle they are purchasing. As a result, sellers of cars of unverifiable high quality may choose to withhold them from the market, leading to a market dominated by lower quality vehicles (or "lemons"). This is also known as "adverse selection."

​The "Lemons" Problem Is That

The "Lemons" Problem Is That