The used car market without warranties suffers from
A) perfect competition.
B) oligopoly.
C) adverse selection and moral hazard.
D) excessive signaling.

Question

Quizplus · Accepted Answer

The used car market without warranties is prone to adverse selection, where sellers have more information about the car's condition than buyers, leading to a market with lower-quality cars. Moral hazard can occur if sellers do not maintain the car properly, knowing they won't bear the consequences after the sale.

The Used Car Market Without Warranties Suffers from