The lemons problem is caused by
A) health-care providers' incentive to order unnecessary tests.
B) used car buyers' inability to determine the quantity of used cars offered for sale.
C) auto insurance companies inability to adequately screen drivers.
D) the missing health care market.
E) government regulations than make some information private.

Question

Quizplus · Accepted Answer

The lemons problem refers specifically to the asymmetry of information between buyers and sellers in the market for used cars. Buyers are unable to determine the quality of the cars offered for sale, which results in a market where only low-quality cars (or "lemons") are sold, driving away potential buyers of higher-quality cars.

The Lemons Problem Is Caused by