Respuesta :
If buyers cannot observe the quality of a car before buying it, they will be willing to pay Less than $10,000 for a car. Thus, the sellers of high-value cars will not be willing to sell their cars. The result of this information asymmetry will be that there are no high-value cars in the market , a problem known as Adverse Selection.
What is Adverse Selection?
Adverse selection refers generally to a situation in which sellers have information that buyers do not have, or vice versa, about some aspect of product quality. In other words, it is a case where asymmetric information is exploited. Asymmetric information, also called information failure, happens when one party to a transaction has greater material knowledge than the other party.
Adverse selection happens when there are two or more parties and one of them has more information than the other.
Therefore, we can conclude that the correct option is C.
Your question is incomplete, but most probably your full question was:
Suppose that there are two types of cars: high value (which are worth $10,000 to buyers) and low value (which are worth $5,000 to buyers). If buyers cannot observe the quality of a car before buying it, they will be willing to pay ______ for a car. Thus, the sellers of high-value cars _____ be willing to sell their cars. The result of this information asymmetry will be that there are ____________, a problem known as adverse selection.
A. Less than $10,000 / will / no high-value cars in the market
B. More than $10,000 / will / no high-value cars in the market
C. Less than $10,000 / will not / no high-value cars in the market
D. More than $10,000 / will not / no low-value cars in the market
E. Less than $10,000 / will not / no low-value cars in the market
Learn more about Adverse Selection on:
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