Use Akerlofs lemons model to explain why restaurants that cater to tourists are

Question

Use Akerlofs lemons model to explain why restaurants that cater to tourists are likely to serve low quality meals. Tourists will not return to this area, and they have no information about the relative quality of the food at various restaurants, but they can determine the relative price by looking at menus posted outside each restaurant. O A. Before eating, consumers cannot determine the quality of the food, they can only compare relative prices and type of cuisine. Since tourists will not return, O B. Before eating, consumers can determine the quality of the food, compare relative prices, and compare the type of cuisine. However, since tourists will not O C. Before eating, consumers cannot determine the quality of the food; they can only compare relative prices and type of cuisine. Since tourists will not return, the O D Before eating consumers cannot determine the quality of the food; they can only compare relative prices and type of cuisine. Since tourists will not return the there is no benefit from reputational effects and thus no incentive to serve high quality meals. return, the restaurant owner has an incentive to reduce the quality to save money. restaurant owner has an incentive to reduce the quality to save money restaurant owner has no incentive to prepare high quality meals to try to impress them.

Explanation / Answer

C is the correct answer

Reason

Since the tourists will not come back, it gives the restaurant owners incentive to make bad quality food and to save money out of it.

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.