Use the Following to Answer Questions

question 32

Multiple Choice

Use the following to answer questions :
Scenario: Used-Car Market
In the used-car market,cars of poor quality are called lemons,whereas cars of good quality are called plums.Suppose that the probability of obtaining a lemon is 60% and the probability of obtaining a plum is 40%.Also,assume that a plum is worth $15 000 and a lemon is worth $3 000.
-(Scenario: Used-Car Market) Use Scenario: Used-Car Market.Adverse selection in this used-car market occurs because of:

• A) asymmetric information.
• B) risk-loving behaviour.
• C) moral hazard.
• D) diversification.

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Definitions:

Reunited

Brought back together after a period of separation.

Authoritarian Parents

Parents who enforce strict discipline and high expectations through a regulatory and controlling approach.

Rules

Prescribed guidelines or directives intended to regulate behavior or processes in various contexts, such as in games, societies, or organizations.

Responsive

Being quick to react or respond positively or effectively to some form of input or stimulation, such as a question, request, or change in environment.