In the used pick-up truck market
A) some of the predictions of the lemons model are observed some of the time.
B) the lemons model accurately describes the market.
C) none of the predictions of the lemons model are observed.
D) there is no asymmetric information, and so the lemons model does not apply.

Question

Quizplus · Accepted Answer

The lemons model predicts that there will be a higher proportion of lower-quality (or "lemon") trucks in the used market due to asymmetric information between buyers and sellers. While this may not always be the case, it is observed some of the time, as some buyers may end up with a lower-quality truck despite paying the same price as a higher-quality one.

In the Used Pick-Up Truck Market