Question

In the presence of the lemons problem we can expect?

1) Efficient market outcomes
2) Over-production
3) Under-production
4) Inefficient market outcome

Answer 1

In the presence of the lemons problem, we can expect an inefficient market outcome.

Step-by-step explanation:

In the presence of the lemons problem, we can expect 4) Inefficient market outcome. The lemons problem is a term used in economics to describe a situation where there is asymmetrical information between buyers and sellers. In this situation, the seller has more information about the quality of the product than the buyer. As a result, the buyer may be hesitant to purchase the product or may offer a lower price. This can lead to an inefficient market outcome.