Without warranties, used car buyers can assume that all used cars are "lemons" because of
A) moral hazard.
B) moral dilemma.
C) adverse selection.
D) adverse reaction.

Question

Quizplus · Accepted Answer

Adverse selection occurs when buyers have less information than sellers, leading them to assume that all used cars are of low quality ("lemons") since they cannot distinguish between good and bad cars.

Without Warranties, Used Car Buyers Can Assume That All Used