If all used cars in a market with symmetric information about quality are sold at the same price, then
A)sellers of good quality cars are subsidizing sellers of lemons.
B)buyers of good quality cars are subsidizing buyers of lemons.
C)sellers of lemons are subsidizing sellers of good quality cars.
D)sellers of good quality cars are subsidizing buyers of lemons.

Question

Quizplus · Accepted Answer

In a market with symmetric information about quality where all used cars are sold at the same price, sellers of good quality cars are effectively subsidizing sellers of lemons because the good quality cars are undervalued while the lemons are overvalued at the uniform price.

If All Used Cars in a Market with Symmetric Information