Which of the Following Can Be a Solution to the Lemons

question 50

Multiple Choice

Which of the following can be a solution to the lemons problem?

• A)Providing testimonials from previous buyers.
• B)Providing accessories to be used in the car.
• C)Providing discount on the purchase of a car.
• D)Providing a warranty that covers the costs of certain repairs.

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Definitions:

Homothetic Preferences

A situation in consumer theory where a consumer's preference structure can be represented by a utility function that is proportionally scalable.

Engel Curve

A graphical representation that shows the relationship between income and the demand for a good or service, keeping all other factors constant.

Utility Function

A mathematical representation of how a consumer ranks different baskets of goods according to their level of satisfaction.

High Income

Refers to individuals or households that earn a significantly higher amount of money compared to the average income levels within a specific geographic region or within a particular demographic.