There is an average price for a used car that accounts for both good used cars and bad used cars ("lemons"). At the current market price for used cars, the persons __________ likely to offer their used cars for sale are people who own __________.

Question

Quizplus · Accepted Answer

This scenario is an example of the "lemon market" problem described by George Akerlof. At the average price, owners of good used cars are less likely to sell because the price undervalues their cars, while owners of "lemons" are more likely to sell because the price overvalues their cars. Thus, both A and B are correct.

There Is an Average Price for a Used Car That