If Buyers Cannot Distinguish Between "Lemons" and "Cherries" in the Used

question 46

Multiple Choice

If buyers cannot distinguish between "lemons" and "cherries" in the used car market but sellers can, the price buyers are willing to pay for used cars will be:

• A) high enough to guarantee that at least 50 percent of the used cars offered for sale are "cherries."
• B) so low that sellers with "cherries" will be unwilling to sell.
• C) so low that sellers with "lemons" will be unwilling to sell.
• D) equal to zero since no one will take the chance of purchasing a "lemon" even if the value of a car known to be a lemon is greater than zero.

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