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

Question

Quizplus · Accepted Answer

Without warranties, buyers cannot distinguish between high quality and low quality used cars. This creates adverse selection, as buyers may assume that all used cars are lemons because they have no way of identifying the good ones.

Without Warranties,used Car Buyers Can Assume That All Used Cars