Empirical analysis with respect to the used car market suggests that:
A)the "lemons" model holds and in the end bad cars totally drive out good cars from the market.
B)the lack of information among consumers drives up the price of bad cars.
C)consumers are partially informed about the quality of used cars making the "lemons" model only partly valid.
D)consumers do not try to gather information to any appreciable degree and depend on the recommendations made by the sellers.

Question

Quizplus · Accepted Answer

Empirical analysis suggests that the "lemons" model only partially holds in the used car market. Consumers are partially informed about the quality of used cars, which means that they have some information to discern between good and bad cars. However, this also means that bad cars can still command a higher price than they should, leading to market inefficiencies. The other options presented in the question are not supported by empirical evidence.

Empirical Analysis with Respect to the Used Car Market Suggests