When consumers cannot tell the difference at the time of sale between high-quality products and those with defects, strong sales of the low-quality products will tend to depress price and drive the high-quality products from the market. Economists call this
A) the curse of advertising.
B) the imperfect information problem.
C) the brand name problem.
D) an open-access resource.

Question

Quizplus · Accepted Answer

This situation is known as the imperfect information problem, where consumers cannot distinguish between high and low-quality products, leading to adverse selection and market inefficiencies.

When Consumers Cannot Tell the Difference at the Time of Sale