Which of the following statements are implications of the lemons problem in the used car market? (i) many people avoid buying vehicles in this market
(ii) used cars have a market value much less than that of new cars
(iii) buyers are just as aware of a used car's defects as sellers
A)(i) only
B)(i) and (ii)
C)(i) and (iii)
D)(ii) and (iii)

Question

Quizplus · Accepted Answer

The lemons problem in the used car market implies that many people avoid buying vehicles in this market, as they cannot be sure of the quality of the car they are buying. This leads to a decrease in demand for used cars and a lower market value than new cars. Therefore, statement (i) and (ii) are implications of the lemons problem. However, statement (iii) is not necessarily true, as buyers may not be aware of all defects in a used car, especially if they are hidden or difficult to spot.

Which of the Following Statements Are Implications of the Lemons