Multiple Choice
Scenario: Tom wants to buy a used iPhone from an online exchange Web site. He expects 50 percent of the used phones to have some defect. He is willing to pay up to $80 for a phone without any defect and $0 for a defective phone. An owner of a good-quality iPhone is likely to sell his phone if he gets a price of $70.
-Refer to the scenario above.Which of the following problems is likely to occur in this market?
A) The fallacy of composition
B) Moral hazard
C) Adverse selection
D) The free-rider problem
Correct Answer:
Verified
Correct Answer:
Verified
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