To Solve the Problem of the Lemons Model in the Used-Car

question 126

Multiple Choice

To solve the problem of the lemons model in the used-car market,

• A) all sellers should offer warranties.
• B) sellers of below-average-quality cars should offer warranties.
• C) sellers of above-average-quality cars should offer warranties.
• D) buyers should interpret the offer of a warranty as evidence of a lower-than-average quality car.
• E) buyers should interpret the offer of a warranty as evidence of an average-quality car.

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Definitions:

Organisms

Living entities that grow, reproduce, and maintain homeostasis, including plants, animals, fungi, and microorganisms.

Punishment

In behavior psychology, a consequence that reduces the likelihood of a behavior being repeated by applying an undesirable outcome or removing a desirable one after the undesired behavior.

Yelling

The act of shouting or raising one's voice in a loud manner, often to convey a message or express an emotion.

Aversive Stimulus

A stimulus that is unpleasant and causes a decrease in the likelihood of a behavior when presented.