The Lemons Problem Is That When There Are Hidden Characteristics

question 79

Multiple Choice

The lemons problem is that when there are hidden characteristics known only to the seller of a used car,

• A)the ratio of lemons to high-quality cars is likely to be high
• B)the ratio of lemons to high-quality cars is likely to be low
• C)good used cars will sell for more than their market value
• D)no lemons will be offered on the market
• E)the price of lemons will be below their market value

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Definitions:

Net Benefits

The total benefits of some activity or policy less the total costs of that activity or policy.

Neoclassical Models

Economic models that emphasize rationality, individual optimization, and equilibrium, focusing on how market mechanisms allocate resources efficiently.

Behavioral Economists

Researchers who study how psychological, emotional, and social factors affect economic decision-making.

Precise

Characterized by exactness and accuracy in expression or detail.