The lemons principle refers to the situation where:
A)neither type of good is offered on the market.
B)high quality goods are never offered on the market.
C)low quality goods are never offered on the market.
D)low quality and high quality goods are sold in the same market.

Question

Quizplus · Accepted Answer

The lemons principle, introduced by George Akerlof in his 1970 paper "The Market for Lemons: Quality Uncertainty and the Market Mechanism," describes a market phenomenon where the presence of lower-quality goods (lemons) drives out the higher-quality goods. This happens because buyers, unable to distinguish between high and low quality, are only willing to pay an average price, making it unprofitable for sellers of high-quality goods to remain in the market.

The Lemons Principle Refers to the Situation Where