One Consequence of the Asymmetric-Information Problem in the Used Car

question 104

Multiple Choice

One consequence of the asymmetric-information problem in the used car market, if left unresolved, is the higher probability of:

• A) New cars being better than used-cars in quality
• B) A declining quality of used cars in the market
• C) A rising quality of used cars in the market
• D) Used-car buyers willing to pay higher prices

---

Definitions:

Inventory

The totality of goods or materials a company holds for the purpose of selling in the market or using in production.

Fixed Assets

Assets that are of a permanent or long-term nature, typically used in the operations of a business, such as buildings, machinery, and equipment.

Full Capacity

The maximum level of output that a company can sustain within a given period, utilizing all available resources efficiently.

Fixed Assets

Long-term tangible assets, such as buildings and machinery, used in the operations of a business that are not expected to be converted into cash within a year.