question archive Which pairing is correct? a
Which pairing is correct? a
Subject:MarketingPrice:2.88 Bought15
Which pairing is correct?
a. Moral hazard: Used car consumers don't know which of the used cars on the market is in good condition (peaches) and which is in bad condition (lemons).
b. Moral hazard: Used car consumers offer a low expected price and for this reason, sellers of good cars (peaches) don't sell them or offer them to sell in the market.
c. Adverse selection: Used car consumers don't know which of the used cars on the market is in good condition (peaches) and which is in bad condition (lemons).
d. Adverse selection: Used car consumers offer a low expected price and for this reason, sellers of good cars (peaches) don't sell them or offer them to sell in the market.
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Option C (Adverse selection: Used car consumers don't know which of the used cars on the market is in good condition (peaches) and which is in bad condition (lemons)) is the correct answer.
It is a situation of adverse selection as there is a presence of asymmetric information between the sellers and the buyers.
