In the used car market without warranties,adverse selection results in
A) sellers of "lemons" claiming that their car is a lemon.
B) only lemons being available for sale.
C) the market price of used cars equal to that of good used cars.
D) an efficient pooling equilibrium.
E) all of the above

Question

Quizplus · Accepted Answer

Adverse selection in the used car market without warranties means that only cars with hidden defects, or "lemons," are available for sale. Good quality used cars are not sold because their owners do not want to risk selling them without warranties, thus reducing the selection of available cars to only "lemons."

In the Used Car Market Without Warranties,adverse Selection Results in