The adverse selection process is prevalent in the used car market because
A) only poorer people are likely to purchase used cars.
B) sellers know more about the vehicles being sold than do potential buyers.
C) the price of the car sends a signal about its quality.
D) so many consumers are adverse to buying used cars.

Question

Quizplus · Accepted Answer

The adverse selection process is prevalent in the used car market because sellers know more about the vehicles being sold than do potential buyers. This asymmetry of information leads to the potential for buyers to purchase low-quality vehicles at high prices.

The Adverse Selection Process Is Prevalent in the Used Car