What term refers to the situation in the used car market where owners are more anxious to sell low-quality cars than high-quality cars?
A)Clunker market
B)Quality conundrum
C)Car scrapping market
D)Low-quality market
E)Lemons market

Question

Quizplus · Accepted Answer

The term that refers to this situation is the "lemons market," which is based on George Akerlof's seminal 1970 paper "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism." The paper explains that buyers of used cars cannot always distinguish between high-quality and low-quality cars before purchase, leading to a situation where owners of low-quality cars are more likely to sell them than owners of high-quality cars. This can ultimately result in a decrease in the overall price of used cars and a reduction in the quality of cars available in the market.

What Term Refers to the Situation in the Used Car