Suppose that there are only two types of used cars,peaches and lemons.Peaches are worth $10,000 and lemons are worth $4,000.Without effective signals such as warranties,the owners of peaches cannot sell their cars for $10,000 because the
A) owners of peaches cannot convince buyers that their cars are worth $10,000.
B) buyers cannot convince owners of peaches to sell their cars for $10,000.
C) owners of lemons cannot convince buyers that their cars are worth more than $4,000.
D) buyers cannot convince owners of lemons to sell their cars for more than $4,000.
E) buyers cannot convince owners of lemons to sell their cars for $4,000.

Question

Quizplus · Accepted Answer

Without effective signals such as warranties, buyers cannot differentiate between the quality of the cars and may not be willing to pay the higher price for peaches. Therefore, owners of peaches cannot sell their cars for $10,000 because they cannot convince buyers that their cars are worth that much.

Suppose That There Are Only Two Types of Used Cars,peaches