The practice of potential buyers offering lower prices for a product of uncertain quality than they would for a product of certain quality is known as:
A)the lemon problem.
B)moral hazard.
C)external costs.
D)None of the above.

Question

The practice of potential buyers offering lower prices for a product of uncertain quality than they would for a product of certain quality is known as:
A)​the lemon problem.
B)​moral hazard.
C)​external costs.
D)​None of the above.

Quizplus · Accepted Answer

The practice of potential buyers offering lower prices for a product of uncertain quality than they would for a product of certain quality is known as the lemon problem. This is because it is often associated with the market for used cars, where buyers are uncertain about the quality of the vehicle and may therefore offer a lower price.

The Practice of Potential Buyers Offering Lower Prices for a Product