Assuming that information is symmetrical in the used car market where both lemons and plums are sold, the equilibrium price for lemons is _____ the equilibrium price for plums.

Question

Quizplus · Accepted Answer

In a symmetrical information market, buyers and sellers have the same information. Since lemons (lower quality cars) and plums (higher quality cars) are distinguishable, the equilibrium price for lemons will be less than that for plums due to their lower quality.

Assuming That Information Is Symmetrical in the Used Car Market