Which one of the following is TRUE of a market for used cars?

Question

Quizplus · Accepted Answer

As buyers become more pessimistic about their chances of getting a high-quality car, they become less willing to pay for used cars, causing the price to decrease for both low-quality and high-quality cars. Option A is incorrect because a consumer typically underestimates the probability of getting a lemon. Option C is incorrect because there is a private information problem, not a public information problem, in the market for used cars. Option D is incorrect because willingness to pay is typically higher than willingness to accept in a market for used cars due to the endowment effect.

Which One of the Following Is TRUE of a Market