Asked by Diana Gasparyan on Apr 27, 2024
Verified
Consider a market in which high-quality and low-quality television sets are sold. Before consumers make a purchase, they do not know the quality of the sets, but the sellers do know. As compared to a situation where both consumers and sellers know the quality of the sets, this situation would:
A) cause no change in the ratio of low to high-quality sets sold.
B) increase the fraction of high-quality sets sold.
C) increase the fraction of low-quality sets sold.
D) cause the average price of goods sold to rise.
Low-Quality Sets
Products or groupings of items characterized by inferior materials, craftsmanship, or performance standards.
High-Quality Sets
Products or collections of items that are distinguished by their superior standards and craftsmanship.
Television Sets
Electronic devices designed for the reception and display of broadcast or recorded visual content.
- Comprehend the issue of the lemons problem and its influence on the dynamics of markets.
Verified Answer
KD
Kendall DimickApr 29, 2024
Final Answer :
C
Explanation :
In a situation where consumers do not know the quality of the sets, they may be more likely to purchase low-quality sets because they are typically less expensive. This could lead to an increase in the fraction of low-quality sets sold, as sellers may take advantage of this and offer more low-quality sets.
Learning Objectives
- Comprehend the issue of the lemons problem and its influence on the dynamics of markets.