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:

Forethought

Forethought is the process of thinking about and planning for future events or actions, often with the intention of achieving a specific goal.

Self Theories

Theories of late adulthood that emphasize the core self, or the search to maintain one’s integrity and identity.

Perceptions

The way in which something is regarded, understood, or interpreted by individuals.

Erik Erikson

A developmental psychologist known for his theory on psychosocial development across the lifespan.