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To Solve the Problem of the Lemons Model in the Used-Car

Question 115

Multiple Choice

To solve the problem of the lemons model in the used-car market,


A) all sellers should offer warranties.
B) sellers of below-average-quality cars should offer warranties.
C) sellers of above-average-quality cars should offer warranties.
D) buyers should interpret the offer of a warranty as evidence of a lower-than-average quality car.
E) buyers should interpret the offer of a warranty as evidence of an average-quality car.

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