The "Lemons Problem" Is Overcome in the Used Car Market

question 67

Multiple Choice

The "lemons problem" is overcome in the used car market by

• A)strict government regulation of private deals between individual buyers and sellers of used cars.
• B)most used cars selling for well below their true values.
• C)"lemon insurance" policies being offered by insurance companies.
• D)the existence of used car dealers who are concerned about maintaining their reputations.

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Definitions:

Toy Manufacturer

A company or individual engaged in the production of toys for children.

Negligence-Based Product Liability

A legal principle holding manufacturers or sellers responsible for harming consumers due to careless design, manufacture, or warning practices.

Compensatory Damages

Monetary compensation awarded to a plaintiff to indemnify actual losses, expenses, or harm suffered due to the defendant's wrongful conduct.

Punitive Damages

Monetary compensation awarded to an injured party that goes beyond that which is necessary to compensate for losses and is intended to punish the wrongdoer.