Adverse selection occurs in the market for used cars because used car buyers

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Adverse selection occurs in the market for used cars because used car buyers have less information than used car sellers. This is because sellers have more knowledge about the condition of the car, while buyers can only observe the car's current state. As a result, sellers are more likely to sell low-quality cars, taking advantage of buyer's lack of information. This can lead to a situation where only low-quality cars are available in the market and buyers are unwilling to pay the price demanded by the sellers, leading to market failure.

Adverse Selection Occurs in the Market for Used Cars Because