There Is an Adverse Selection Problem in the Market for Used

question 135

Multiple Choice

There is an adverse selection problem in the market for used cars because

• A) owners of poor-quality cars have a strong incentive to sell their cars, while owners of high- quality used cars have more incentive to keep their cars.
• B) owners of high-quality cars will have a strong incentive to sell their cars to obtain the higher prices, while owners of poor-quality cars will have more incentive to keep theirs.
• C) most people prefer new cars, but the high prices for new cars force most of them to buy used cars.
• D) government actions to pass "lemon" laws have reduced information on used cars.

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Definitions:

Unsettling Thoughts

Thoughts that cause unease, discomfort, or anxiety, often reflective of internal conflicts or external stressors.

Conscious Awareness

The state or quality of being aware of an external object or something within oneself, marked by mental focus and self-awareness.

Repressed

The unconscious exclusion of painful or unwanted thoughts, feelings, or memories from conscious awareness.

Unsettling

causing discomfort or unease, often by being unexpected or unfamiliar.