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:

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium is not achieved due to market failures or interventions.

Marginal Cost Curve

A graphical representation showing how the cost to produce one additional unit of output varies with the level of production.

Marginal Revenue Curve

A visual representation that shows the additional revenue generated by selling one more unit of a good or service.

Collude

To engage in a secret or illegal cooperation or conspiracy, especially in order to cheat or deceive others.