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Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the av

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Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the av

Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the average price of a good car is $9,000 and the average price of a lemon is $3,000. If rational buyers are willing to pay $6,000 for a used car, then sellers will agree to sell mostly the lemons at this price. What is the term used to describe this situation?
A) moral hazard
B) adverse selection
C) an efficient market
D) economic irrationality

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Essentials of Economics

Edition: 4^th

Authors: Hubbard, O'Brien

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