George Akerloff focused the market for used cars and discussed an issue later generally called the "lemons problem." A "lemon" is a low quality used car, with the seller but not the potential buyer aware of this. Since sellers have more information about the quality of the car: moral hazard causes an inefficiently small number of transactions to Occur. adverse selection causes an inefficiently large number of transactions to occur. adverse selection causes an inefficiently small number of transactions to occur.

George Akerloff focused the market for used cars and discussed an issue later generally called the "lemons problem." A "lemon" is a low quality used car, with the seller but not the potential buyer aware of this. Since sellers have more information about the quality of the car: moral hazard causes an inefficiently small number of transactions to Occur. adverse selection causes an inefficiently large number of transactions to occur. adverse selection causes an inefficiently small number of transactions to occur.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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