One consequence of the asymmetric-information problem in the used car market, if left unresolved, is the higher probability of:
A) New cars being better than used-cars in quality
B) A declining quality of used cars in the market
C) A rising quality of used cars in the market
D) Used-car buyers willing to pay higher prices

Question

Quizplus · Accepted Answer

The asymmetric-information problem in the used car market means that the seller may have more information about the quality of the car than the buyer. This can lead to a decline in the quality of the used cars in the market because sellers with low-quality cars are more likely to sell them to unsuspecting buyers who cannot fully assess the quality of the car. This can lead to a decrease in trust in the market and ultimately a decline in the quality of used cars.

One Consequence of the Asymmetric-Information Problem in the Used Car