Scenario: Tom Wants to Buy a Used IPhone from an Online

question 59

Multiple Choice

Scenario: Tom wants to buy a used iPhone from an online exchange Web site. He expects 50 percent of the used phones to have some defect. He is willing to pay up to $80 for a phone without any defect and $0 for a defective phone. An owner of a good-quality iPhone is likely to sell his phone if he gets a price of $70.
-Refer to the scenario above.Which of the following problems is likely to occur in this market?

• A) The fallacy of composition
• B) Moral hazard
• C) Adverse selection
• D) The free-rider problem

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Definitions:

Belau

Another name for Palau, an island country located in the western Pacific Ocean, known for its pristine marine environment, scuba diving, and rich cultural heritage.

Côte d'Ivoire

A West African country known for its beach resorts, rainforests, and a significant production of coffee and cocoa.

Dan Ceremonial Spoons

Artifacts linked to the Dan people of West Africa, often intricately carved and used in ceremonies related to hospitality and prestige.

Rice Harvest

The process or period of gathering ripe rice crops from the fields, a crucial agricultural activity in many cultures around the world.