Consider a used car market in which half the cars are good and half are bad (lemons).If buyers are rational,the prices being offered for used cars will result in

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In a used car market with asymmetric information, buyers cannot distinguish between good cars and lemons. As a result, they offer a price that reflects the average quality. This leads to adverse selection, where sellers of good cars exit the market, leaving a larger proportion of lemons being sold.

Consider a Used Car Market in Which Half the Cars