If All Used Cars in a Market with Symmetric Information

question 78

Multiple Choice

If all used cars in a market with symmetric information about quality are sold at the same price, then

• A)sellers of good quality cars are subsidizing sellers of lemons.
• B)buyers of good quality cars are subsidizing buyers of lemons.
• C)sellers of lemons are subsidizing sellers of good quality cars.
• D)sellers of good quality cars are subsidizing buyers of lemons.

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Definitions:

Materials Quantity Variance

This variance measures the difference between the actual quantity of material used in production and the standard quantity allowed, multiplied by the standard cost per unit of material.

Direct Labor Costs

Expenses related to employees who directly produce a product or provide a service, such as wages for assembly line workers.

Work in Process Inventory

Inventory that includes materials and labor that are currently in the production process but not yet completed.

Materials Price Variance

The difference between the actual cost of direct materials and the standard cost, reflecting how effectively a company is purchasing materials.