When sellers have more information about products than buyers do, we would expect:
A) sellers to get higher prices for their goods than they could otherwise.
B) buyers to pay lower prices for goods than they would otherwise.
C) high-quality goods to drive low-quality goods out of the market.
D) low-quality goods to drive high-quality goods out of the market.

Question

Quizplus · Accepted Answer

When sellers have more information than buyers, it can lead to a market failure known as "adverse selection," where low-quality goods drive high-quality goods out of the market because buyers cannot accurately assess the quality and thus are not willing to pay a premium for high-quality goods.

When Sellers Have More Information About Products Than Buyers Do