Which of these is explained by the lemons problem and other asymmetric information problems?
a. The fact that securities markets are only accessible by large established firms
b. The reason most financial transactions involve financial intermediaries
c. The existence of firms such as credit rating agencies
d. All of these
Market of Lemons
Market of lemons refers to a market where the issue of asymmetric information is faced by the buyers and sellers of the commodities. It refers to a market where the seller might charge a higher price or sell low-quality products because the customers are uniformed and do not have as much knowledge about the product as the seller have.
Answer and Explanation: 1
d is correct answer.
Lemon problem and asymmetric information problems are faced by security markets. This is the reason that only large institutions...
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fromChapter 2 / Lesson 11
Learn the definition of problem-solving, different types of problems, and problem-solving strategies. See examples of well-defined and ill-defined problems.