Asked by Krystal Bandith on Jul 03, 2024
Verified
The problem that arises when one person performs a task on behalf of another person is called the lemons problem.
Lemons Problem
A phenomenon where the presence of information asymmetry in a market leads to low-quality products being sold, as sellers have more information about the product than buyers.
- Recognize the relationship between asymmetric information and market failures such as the lemons problem.
Verified Answer
SA
Saleh AlaqrabawiJul 03, 2024
Final Answer :
False
Explanation :
The problem described is known as the "principal-agent problem," not the lemons problem. The lemons problem refers to issues of asymmetric information in markets, particularly when sellers have more information about the quality of a product than buyers.
Learning Objectives
- Recognize the relationship between asymmetric information and market failures such as the lemons problem.
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