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Location: Halstead, Kansas, United States

This is my seventh year at Halstead which is also where I live with my wife and my soon to be two year old daughter.

Sunday, January 30, 2005

Economics Online Question #2

What exactly is the "lemon's problem" in economics? How can the free market solve the problem without resorting to extensive government intervention?

3 Comments:

Anonymous Anonymous said...

A market can have a lemon's problem when one party to the transaction has far superior information to the other and defects are not obvious.
A lemon's market is inefficient. Both consumers and reputable sellers of high quality goods are harmed by the consumer's inability to distinguish superior goods. Markets beset by lemon's problems may be improved by government intervention, which can aid both consumers and honest sellers.
Moral restraints and legal prohibitions, in a functional, representative government, are generally mutually supportive. They can also support, instead of supplant, voluntary agreement.
-Mary

12:58 PM  
Anonymous Anonymous said...

The free market can prove their produce is not a lemon by showing their confidence in it through incentives. This can be done through trials (letting people test the product out,) warranties, and consumer reports.
-Mary

5:25 PM  
Blogger Mr. Warsnak said...

Well done Mary. You get full credit.

8:21 PM  

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