If buyers cannot distinguish between "lemons" and "cherries" in the used car market but sellers can, the price buyers are willing to pay for used cars will be:
A) high enough to guarantee that at least 50 percent of the used cars offered for sale are "cherries."
B) so low that sellers with "cherries" will be unwilling to sell.
C) so low that sellers with "lemons" will be unwilling to sell.
D) equal to zero since no one will take the chance of purchasing a "lemon" even if the value of a car known to be a lemon is greater than zero.

Question

Quizplus · Accepted Answer

Buyers will offer a price reflecting the average quality of cars, which is lower than the value of "cherries," causing sellers of "cherries" to exit the market.

If Buyers Cannot Distinguish Between "Lemons" and "Cherries" in the Used