The lemons model predicts that the market price of high-quality used cars will be ________ the true value of high-quality used cars, so that only relatively ________ cars will be put up for sale in market.
A)greater than; high-quality
B)less than; high-quality
C)greater than; low-quality
D)less than; low-quality

Question

Quizplus · Accepted Answer

If risk-neutral buyers cannot observe that a car is high-quality, then they will not be willing to pay more than their reservation price for an average-quality car. As a result, the owners of high-quality cars will be reluctant to put them up for sale.

The Lemons Model Predicts That the Market Price of High-Quality