The market for lemons refers to a situation where sellers are better informed than buyers about the quality of the good for sale, like used cars. While sellers know the true quality of the car, buyers can’t distinguish the good cars from the bad cars (a.k.a. lemons). Consequently, from the buyer's perspective, there is a 50-50 chance that cars are either high or low quality, and therefore they will perceive all cars as medium quality cars. Which of the following statements are true? Multiple Choice From the seller's point of view, the price that
The market for lemons refers to a situation where sellers are better informed than buyers about the quality of the good for sale, like used cars. While sellers know the true quality of the car, buyers can’t distinguish the good cars from the bad cars (a.k.a. lemons). Consequently, from the buyer's perspective, there is a 50-50 chance that cars are either high or low quality, and therefore they will perceive all cars as medium quality cars. Which of the following statements are true?
-
From the seller's point of view, the
price that buyers are willing to pay is too low. Therefore, they will find it difficult to sell their cars at "true" value. -
For the sellers who are selling lemons, the offered price will be higher than what they have expected. Therefore, they will sell lemons to the buyers at a higher price.
-
Because buyers perceive all cars as medium quality cars they will pay a price that is between the price of good cars and the price of lemons.
-
all of the above are true
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
