Suppose That There Are Only Two Types of Used Cars

question 127

Multiple Choice

Suppose that there are only two types of used cars, peaches and lemons. Peaches are worth $10,000, and lemons are worth $4,000. If the market is such that only lemons are sold, then used cars are

• A) experience goods and the used car market has effective signals.
• B) experience goods and the used car market lacks effective signals.
• C) not experience goods and the used car market has effective signals.
• D) not experience goods and the used car market lacks effective signals.

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Definitions:

Perception

The cognitive process that interprets and makes sense of the information gathered through the senses, forming our awareness of the environment.

Awareness

The knowledge or perception of a situation or fact; consciousness about something.

Ineffable

That which is too great or intense to be expressed in words; incapable of being described or explained.

Conscious Experience

Refers to any mental state, event, or process that a person is aware of.