The Lemons Problem Occurs Mainly Because of

question 162

Multiple Choice

The lemons problem occurs mainly because of

• A) asymmetric information.
• B) a market failure.
• C) negative externality.
• D) positive externality.

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Definitions:

Impairment of Assets

A decrease in the recoverable value of an asset below its carrying amount, leading to an adjustment of its valuation on the balance sheet.

Financial Position

The status of the assets, liabilities, and equity of an entity as detailed in the balance sheet, indicating the entity’s economic resources and obligations at a given time.

AASB 101

The Australian Accounting Standards Board guideline concerning the presentation of financial statements.

Corporations Act

A major legislation regulating corporate entities in some jurisdictions, detailing rules on incorporation, management, shareholders, and financial reporting.