Adverse Selection Occurs in the Used Car Market Because

question 72

Multiple Choice

Adverse selection occurs in the used car market because:

• A)the seller has more information than the buyer.
• B)the buyer has more information than the seller.
• C)both the buyer and the seller have incomplete information.
• D)Any of these could be the cause of adverse selection in the used car market.

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Definitions:

Standard Costs

Costs that are predetermined on a per-unit basis. Standard costs are used as a benchmark for evaluating performance. These costs are often used in or are the output from the budgeting process.

Efficiency Losses

Reductions in economic well-being, reflected by the inability of a market to allocate resources optimally.

Standard Costs

The predetermined expenses for the production of a product or operation of a service, used as a baseline to measure performance.

Direct Labor Wage Variance

The difference between the expected cost of direct labor for production and the actual cost incurred.