The lemons principle exists when:
A)it is costly to tell different qualities.
B)it is costly to tell if some workers are working harder than others.
C)transaction costs are zero.
D)a pooling contract is not feasible.

Question

Quizplus · Accepted Answer

The lemons principle, introduced by George Akerlof, refers to the problem of asymmetric information where it is costly or difficult to distinguish between high-quality and low-quality products, leading to market inefficiencies.

The Lemons Principle Exists When