Why is the study of asymmetric information associated with the market for lemons?
A) Potential buyers of used cars have difficulty separating good used cars from bad used cars; bad used cars are often referred to as lemons.
B) Because there is little advertising in the market for lemons, buyers have difficulty determining the quality of lemons before they are purchased.
C) Sellers of citrus fruit lemons, oranges, grapefruit know the difference between bad fruit and good fruit; buyers do not have this information.
D) Most sellers of used cars have less information about their cars than the dealers who buy them; used cars are often referred to as lemons.
Question 2
George Gnat subscribes to a monthly pest control service for his home.
Last week the owner of the service informed George that he will have to raise his monthly service fee because of increases in the price of gasoline used by his workers on their service trips. How is the market for pest control services affected by this?
A) There is a decrease in the demand for pest control services.
B) There is a decrease in the supply of pest control services.
C) There is a decrease in the quantity of pest control services supplied.
D) There is an increase in the supply of pest control services.
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