The 'Lemon Market' theory, developed by George Akerlof, demonstrates how asymmetric information *after* a transaction is completed leads to moral hazard and the eventual collapse of the insurance market.

Answer: False

Akerlof's 'Market for Lemons' specifically addresses *adverse selection*, which occurs *before* a transaction takes place. Because the seller knows the true quality of the used car (whether it's a 'peach' or a 'lemon') and the buyer does not, the buyer will only offer an average, low price. This drives sellers of high-quality cars out of the market, leaving only lemons, and potentially causing the entire market to collapse. Moral hazard occurs *after* the transaction.