If Buyers Cannot Assess the Quality of Used Cars but There

question 39

Multiple Choice

If buyers cannot assess the quality of used cars but there are warranties for cars

• A) too few lemons are sold.
• B) too many good used cars are sold.
• C) good used cars are sold at a higher price than lemons.
• D) there is an adverse selection problem.

---

Definitions:

Investing Activities

Refers to the acquisition and disposition of long-term assets and other investments not included in cash equivalents.

Free Cash Flow

The amount of operating cash flow available to a company after it purchases the property, plant, and equipment necessary to maintain its current operations, computed as cash flows from operating activities less cash used to purchase property, plant, and equipment.

Operating Cash Flow

Cash generated from the core business operations of a company, excluding financing and investment activities.

Direct Method

In cash flow reporting, it involves directly identifying and reporting major classes of gross cash receipts and payments.