The lemons problem gives the owners of above-average-quality used cars an incentive to:
A)exaggerate the quality of their cars when selling them.
B)offer a warranty when selling their cars.
C)understate the true quality of their cars when selling them.
D)ask for a sales price that is higher than the blue book value of their car.

Question

Quizplus · Accepted Answer

Since a warranty is a credible signal of quality, the owners high-quality used cars will have an incentive to offer a warranty when selling their cars.

The Lemons Problem Gives the Owners of Above-Average-Quality Used Cars