Suppose That in a Market for Used Cars,there Are Good

question 118

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)Both good used cars and lemons will sell for $4,500 each.
• B)Only lemons will sell,for $800 each.
• C)Both good used cars and lemons will sell for $1,000 each.
• D)Most used cars offered for sale will be lemons.

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Definitions:

Dim Light

A low-intensity illumination that provides a subdued or soft light environment, often creating a calming or romantic atmosphere.

Colour Vision

The skill of the visual system in identifying objects according to the light wavelengths they emit, reflect, or allow to pass.

Pupil

The pupil is the adjustable opening in the center of the iris of the eye, through which light enters and is focused on the retina.

Iris

The colored ring of muscle around the pupil of the eye, responsible for controlling the size of the pupil and thus the amount of light reaching the retina.