One result of adverse selection in the market for used cars is
A) more lemons (low quality) may be offered for sale than plums (high quality).
B) more plums (high quality) may be offered for sale than lemons (low quality).
C) few lemons (low quality) are sold.
D) no used cars are sold.

Question

Quizplus · Accepted Answer

Adverse selection in the market for used cars occurs when sellers have more information about the quality of the car than buyers. As a result, sellers with low-quality cars (lemons) may be more likely to offer them for sale since they know their cars have issues but buyers do not. This leads to a situation where more lemons (low quality) may be offered for sale than plums (high quality). Choice A is therefore the most appropriate answer.

One Result of Adverse Selection in the Market for Used