Each of the Following Is an Example of an Institution

question 7

Multiple Choice

Each of the following is an example of an institution that helps limit the lemons problem in the used car market EXCEPT:

• A) a mechanic's inspection of the vehicle.
• B) Carfax (a website that provides verified information about the vehicle's history).
• C) a warranty offered by the seller.
• D) a statement from the seller regarding the vehicle history.

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Definitions:

Acid-test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick or liquid assets.

Current Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets.

Liabilities

Financial obligations or debts owed by a business to others, which must be paid back.

Merchandise Inventory

Merchandise inventory includes goods that a company intends to sell in the ordinary course of business, calculated at the cost of acquiring the goods.