In Statesboro, GA, in the 1990’s home builders were using a faulty brand of windows when...

In Statesboro, GA, in the 1990’s home builders were using a faulty brand of windows when constructing houses. The windows would leak causing damage to the walls of the house. Buyers were aware that the faulty windows were being used in the houses, but they were unsure which houses had them and which brand of windows were faulty. This caused some potential home buyers to put off buying a home. The problem in Statesboro, GA is called…

a) a moral hazard

b) a lemons problem

c) the principal agent problem

d) a regulation problem

Expert Solution

The problem discussed above is lemons problem where they are unable to distinguish between the good and the bad windows.

Hence the correct option is

A lemons problem.

Rahul Sunny answered 2 years ago

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