Which outcome may well result from severe adverse-selection problems
A)Too few good used cars are offered for sale.
B)Wages are too low relative to equilibrium levels.
C)Too many good drivers buy too much automobile insurance.
D)Prices for inferior goods are too low.

Question

Quizplus · Accepted Answer

Severe adverse-selection problems in the used car market may result in too few good used cars being offered for sale. This is because buyers may be cautious about purchasing a used car due to the risk of buying a lemon, while sellers who do have good quality used cars may decide not to sell if they are unable to obtain a fair price for their vehicle. As a result, the market may become thin, leading to a shortage of good quality used cars.

Which Outcome May Well Result from Severe Adverse-Selection Problems