Which of the following statements is (are) TRUE?
I. The lemons problem causes an inefficiently high number of sales in high-quality goods.
II. The lemons problem affects how much buyers are willing to pay for goods.
III. The lemons problem does not affect the market for services.
A) I and II
B) II
C) III
D) I, II, and III

Question

Quizplus · Accepted Answer

The lemons problem, introduced by George Akerlof, primarily affects how much buyers are willing to pay for goods due to information asymmetry, leading to a market where the quality of goods can be uncertain. It does not cause an inefficiently high number of sales in high-quality goods; rather, it can lead to a market failure where high-quality goods are driven out of the market. Additionally, the lemons problem is not limited to goods; it can also affect the market for services, where similar issues of information asymmetry exist.

Which of the Following Statements Is (Are) TRUE