Suppose That in a Market for Used Cars, There Are

question 170

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)Sellers of good used cars will drop out of the market.
• B)Sellers of good used cars will incur losses.
• C)Sellers of lemons will drop out of the market.
• D)Used cars will sell for $3,000.

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Definitions:

Social Psychologists

Scientists who study how individuals think, feel, and behave in social contexts, focusing on the influences of interpersonal and group dynamics on human behavior.

Variance

In statistics, a measure of the dispersion or spread of a set of data points or values in a data series.

Standard Deviations

A measure of variability that indicates the average amount each score in a distribution differs from the mean.

Direct-To-Consumer

A business model where companies sell products directly to consumers, bypassing traditional retail channels.