Suppose That in a Market for Used Cars,there Are Good

question 118

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)Both good used cars and lemons will sell for $4,500 each.
• B)Only lemons will sell,for $800 each.
• C)Both good used cars and lemons will sell for $1,000 each.
• D)Most used cars offered for sale will be lemons.

---

Definitions:

Overwhelming Anxiety

A state of excessive worry and fear that is disproportionate to the situation at hand, leading to significant distress or impairment.

Obsessions

Persistent, unwanted thoughts, images, or urges that cause distress or anxiety.

Compulsions

Repetitive behaviors or mental acts that a person feels driven to perform in response to an obsession, typically aimed at reducing anxiety or preventing a feared event or situation.

Recurrent Thoughts

Repeated thoughts or ideas that frequently occupy a person's mind.