What is the lemons problem? How do firms try to address this problem?
What will be an ideal response?
The lemons problem occurs when asymmetric information leads to a general decline in product quality in an industry. Firms try to address this problem by offering product guarantees and warranties, providing industry standards and offering product certification, all of which help consumers separate high-quality products from low-quality products.
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The Volcker Rule addresses the off-balance-sheet problem involving
A) trading risks. B) selling loans. C) loan guarantees. D) interest rate risks.
If MR>MC, then the firm should
a. increase production b. decrease production c. keep the prices constant d. keep the production level constant
Falling output, in the short run, could be due to:
A. an increase in short-run aggregate supply. B. a reduction in aggregate demand. C. an increase in long-run aggregate supply. D. an increase in aggregate demand.
A charity that used to make an appeal to people's sense of civic or moral responsibility, but no longer does, is likely to ________ the free-rider problem and lead to a ________ level of contribution to the public good.
A. reduce; smaller B. reduce; larger C. increase; smaller D. increase; larger