Warranties on products _____ asymmetric information, but they _____ the lemons problem.
A) reduce; do not reduce
B) do not eliminate; reduce
C) increase; do not reduce
D) eliminate; increase

Question

Quizplus · Accepted Answer

Warranties on products do not eliminate asymmetric information because some level of information imbalance between buyers and sellers remains, but they reduce the lemons problem by providing assurance about the product's quality, thus mitigating buyers' concerns about getting a defective product.

Warranties on Products _____ Asymmetric Information, but They _____ the Lemons

Warranties on Products _ Asymmetric Information, but They _ the Lemons