The "Lemons Problem" Exists Because of

question 79

Multiple Choice

The "lemons problem" exists because of

• A)transactions costs.
• B)economies of scale.
• C)rational expectations.
• D)asymmetric information.

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Definitions:

Competitive Market

A market structure characterized by a large number of sellers and buyers, leading to competitive prices and quality of goods and services.

Pure Competition

A market structure characterized by a large number of small firms, a homogeneous product, complete information, and free entry and exit, leading to price taking behavior.

Commodity Products

Goods that are interchangeable with others of the same type and are usually sold based on price rather than brand or differentiation.

Monopolistic Competition

Monopolistic competition is a market structure characterized by many sellers offering differentiated products or services, leading to a competitive environment where companies have some price-making power.