(Scenario: Used-Car Market)Use Scenario: Used-Car Market.If buyers cannot distinguish between lemons and plums,eventually this used-car market will: Scenario: Used-Car Market
In the used-car market,cars of poor quality are called lemons,while cars of good quality are called plums.Suppose that the probability of obtaining a lemon is 60% and the probability of obtaining a plum is 40%.Also,assume that a plum is worth $15,000 and a lemon is worth $3,000.

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If buyers cannot distinguish between lemons and plums, then they will likely be hesitant to pay the higher price for a plum and therefore opt for the cheaper lemon. This will increase the demand for lemons and lead to a market mostly made up of lemons.