One Result of Adverse Selection in the Market for Used

question 21

Multiple Choice

One result of adverse selection in the market for used cars is

• A) more lemons (low quality) may be offered for sale than plums (high quality).
• B) more plums (high quality) may be offered for sale than lemons (low quality).
• C) few lemons (low quality) are sold.
• D) no used cars are sold.

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Definitions:

Implied Warranties

Guarantees that are not written down or explicitly stated but are understood to exist in a transaction, providing assurance that a product or service will meet certain standards.

Assignor

The party in a contract who transfers their rights or interests to another party, known as the assignee.

Assignee

An individual or entity to whom rights or obligations are transferred from another party.

Obligor

An individual or entity legally bound to fulfill an obligation, such as paying a debt.