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:

Technological Impact

The effect of technology on society and the environment, which can be positive, negative, or neutral.

Consumption Per Person

The average amount of a resource, product, or energy used by a single individual, often used to assess lifestyle impacts on the environment or to gauge economic activity.

Biodiversity Degradation

The reduction or loss of biodiversity from ecosystems, typically due to human activities like deforestation, pollution, and climate change.

Poverty

A socio-economic condition characterized by a lack of resources or income that is sufficient to meet basic living needs.