Each of the following is an example of an institution that helps limit the lemons problem in the used car market EXCEPT:
A) a mechanic's inspection of the vehicle.
B) Carfax (a website that provides verified information about the vehicle's history).
C) a warranty offered by the seller.
D) a statement from the seller regarding the vehicle history.

Question

Quizplus · Accepted Answer

The lemons problem, identified by George Akerlof, refers to the issue of quality uncertainty in markets, where sellers have more information about the product than buyers. Mechanic inspections, verified information from Carfax, and warranties directly address this information asymmetry by providing reliable information or assurance about the vehicle's condition. In contrast, a statement from the seller does not inherently offer a reliable solution to the lemons problem, as it is not independently verified and could be biased or inaccurate.

Each of the Following Is an Example of an Institution