Suppose There Are Only Two Kind of Cars in the Market

question 118

Multiple Choice

Suppose there are only two kind of cars in the market for used cars: lemons and good cars. A lemon is worth $1,000 both to its current owner and to anyone who buys it. A good car is worth $8,000 to its current and potential owners. Buyers can't tell whether a car is a lemon until after they have bought the car, and there is no warranty. What is the prevailing price of a used car?

• A) $8,000
• B) $1,000
• C) $4,500
• D) The prevailing price depends on how many lemons and how many good cars are traded.

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Definitions:

Principles

Fundamental truths or propositions that serve as the foundation for a system of belief, behavior, or reasoning.

Rationalization

The process of justifying behaviors or decisions with logical, plausible reasons, often to conceal the true motives or feelings.

Unethical Behavior

Actions or practices that are morally wrong or violate societal norms or professional standards.

Organizational Culture

The shared values, beliefs, and practices that shape how an organization's members interact and work together.