Suppose That in a Market for Used Cars, There Are

question 170

Multiple Choice

Suppose that in a market for used cars, there are good used cars and bad used cars (lemons) .Consumers are willing to pay as much as $6,000 for a good used car but only $1,000 for a lemon.Sellers of good used cars value their cars at $5,000 each and sellers of lemons value their cars at $800 each.Buyers cannot tell if a used car is reliable or is a lemon.Based on this information, what is the likely outcome in the market for used cars?

• A)Sellers of good used cars will drop out of the market.
• B)Sellers of good used cars will incur losses.
• C)Sellers of lemons will drop out of the market.
• D)Used cars will sell for $3,000.

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Definitions:

Exploitative Child Labor

The employment of children in a manner that is morally, socially, or legally unacceptable, often because it is excessively demanding, hazardous, or interferes with their education.

Foraging Society

A type of society that relies on hunting, fishing, and gathering wild plants and animals for food rather than domesticating species.

Capitalist Society

An economic system where trade, industry, and the means of production are largely or entirely privately owned and operated for profit, characterized by competition and a free market.