A person buys a used 1998 Honda Civic and finds that there is a problem in the drive train so that the whole set of axles must be replaced.However,the state has a law that protects the buyer from these kinds of discoveries for 30 days post purchase.These lemon laws attempt to correct the problem of:

Question

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Lemon laws attempt to correct the problem of adverse selection, which occurs when information asymmetry leads to one party (the seller) having more information about a product than the other party (the buyer). In this case, the seller may have known about the drive train problem, but the buyer did not, leading to an unfair transaction. The lemon law provides a safety net for the buyer by requiring the seller to disclose any known defects and offering protection for a limited time period after the sale.

A Person Buys a Used 1998 Honda Civic and Finds