Suppose you notice that the market for used bikes is dominated by lemons (low-quality bikes). In such a situation, if you are a buyer of used bikes, you are faced with
A) a positive externality.
B) perfect information.
C) an adverse selection problem.
D) symmetric information.

Question

Quizplus · Accepted Answer

If the market for used bikes is dominated by lemons, then there is an adverse selection problem. This means that the seller knows more about the quality of the bike than the buyer, making it difficult for the buyer to identify and select high-quality bikes.

Suppose You Notice That the Market for Used Bikes Is