Title: QUIZ: Why Is It So Difficult To Buy a High-Quality Used Car? -- Page One Economics®
Course: Kelly's Copying and Exporting Course > Section: Why Is It So Difficult To Buy a High-Quality Used Car? -- Page One Economics®

Q: In the used-car market, who has an advantage?
- Buyers, because they typically have less information about the car’s condition
- Sellers, because they typically have more information about the car’s condition
- Buyers, because they typically have more information about the car’s condition
- Sellers, because they typically have less information about the car’s condition
A: Sellers, because they typically have more information about the car’s condition

Q: What is "asymmetric information" in the used-car market?
- When buyers and sellers have equal knowledge about a car’s condition
- When neither party has any information about the car
- When one party in a transaction has more information than the other
- When the government regulates all used-car sales
A: When one party in a transaction has more information than the other

Q: What is a “lemon” in the used-car market?
- A high-quality car that retains its value
- A car that has been in a minor accident
- A low-quality car with defects
- A certified pre-owned vehicle
A: A low-quality car with defects

Q: How do sellers attempt to close the asymmetric information gap in used car markets?
- By raising prices to indicate their product is high quality
- By offering warranties, certifications, and Lemon Laws
- By offering extended payment plans
- By investing in better marketing to communicate the product to buyers
A: By offering warranties, certifications, and Lemon Laws

Q: How do warranties and certifications help reduce asymmetric information?
- They guarantee a car is brand new and has less than 100 miles.
- They assure buyers that a car meets certain quality standards.
- They lower the cost of new cars by inflating the market with better deals for used cars.
- They prevent sellers from making a profit off of a low-quality vehicle.
A: They assure buyers that a car meets certain quality standards.

Q: Which of the following is an example of moral hazard?
- A buyer researching a car’s history before making a purchase
- A person driving more recklessly after purchasing car insurance
- A lender checking a borrower’s credit report
- A seller providing a warranty to reassure a buyer of a car’s quality
A: A person driving more recklessly after purchasing car insurance

Q: Why might lenders experience asymmetric information in credit markets?
- Lenders know more about the borrower's income than the borrower does.
- Borrowers often have more information about their own creditworthiness than lenders.
- Credit reports contain all necessary borrower information.
- Lenders always have better knowledge of market conditions.
A: Borrowers often have more information about their own creditworthiness than lenders.

Q: Which of the following is an example of adverse selection in the health insurance market?
- A person starts going to the doctor more frequently after buying health insurance
- A person with a chronic illness buys health insurance because they expect to need medical care soon
- A healthy person buys health insurance to protect against future emergencies
- A person engages in risky behavior since they know insurance will pay some of the cost if anything bad happens
A: A person with a chronic illness buys health insurance because they expect to need medical care soon

Q: What effect does asymmetric information tend to have on the quality of used cars in the market?
- It encourages the sale of more high-quality cars.
- It leads to a market with more low-quality cars.
- It results in higher prices for all used cars.
- It has no effect on the quality of cars available.
A: It leads to a market with more low-quality cars.

Q: Which method can buyers use to gain additional information about a used car?
- Read the description posted by the seller
- Have a mechanic inspect the vehicle
- Ask for a discount before purchasing
- Rely on the seller's word
A: Have a mechanic inspect the vehicle