Why Is the Study of Asymmetric Information Associated with the Market

question 120

Multiple Choice

Why is the study of asymmetric information associated with the market for "lemons"?

• A)Sellers of citrus fruit-lemons,oranges,grapefruit-know the difference between bad fruit and good fruit; buyers do not have this information.
• B)Because there is little advertising in the market for lemons,buyers have difficulty determining the quality of lemons before they are purchased.
• C)Potential buyers of used cars have difficulty separating good used cars from bad used cars; bad used cars are often referred to as "lemons."
• D)Most sellers of used cars have less information about their cars than the dealers who buy them; used cars are often referred to as "lemons."

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Definitions:

National Saving

The total amount of savings generated within a country, equal to the sum of private and public savings.

Means-tested Programs

Government assistance programs where eligibility is based on the recipient's income or resources.

Aggregate Supply

The total supply of goods and services that firms in an economy plan on selling during a specific time period at various price levels.

Aggregate Demand

The comprehensive market demand for all types of goods and services within an economy, pegged at a certain price level throughout a specific time period.