The Lesson for Consumers to Learn from the Lemons Model

question 137

Multiple Choice

The lesson for consumers to learn from the lemons model is

• A) never buy a used car.
• B) never sell a used car.
• C) never expect a used car for sale to be of average or better quality.
• D) above-average-quality used cars are never for sale.
• E) always expect a used car for sale to be of average quality.

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Definitions:

Adam Smith

An 18th-century Scottish economist and philosopher, best known for his theories on capitalism and the invisible hand of the market.

Free Market

A system of voluntary exchange in which every agent is free to produce, buy, and sell “as the market will bear,” without interference or standards set by any outside authority.

Economic Arrangements

The structured and systemic ways in which economic activities and resources are organized, distributed, and managed within a society or between entities.

Minimal Government

A political philosophy that advocates for a government with the least amount of power necessary to maintain social order and protect individual rights.