Economics • Economic BasicsMedium
In microeconomics, the 'Market for Lemons' paper by George Akerlof illustrates which of the following economic concepts?
A. Moral Hazard
B. Adverse Selection✓ Correct Answer
C. Principal-Agent Problem
D. Tragedy of the Commons
💡 Solution & Explanation
George Akerlof examined asymmetric information in used car markets, illustrating how uncertainty over quality leads to adverse selection where inferior goods crowd out superior ones. Moral hazard involves post-contractual behavioral changes, whereas the principal-agent problem deals with goal misalignment.
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