Use the Following to Answer Questions

Multiple Choice

Use the following to answer questions :
Scenario: Used-Car Market
In the used-car market,cars of poor quality are called lemons,whereas cars of good quality are called plums.Suppose that the probability of obtaining a lemon is 60% and the probability of obtaining a plum is 40%.Also,assume that a plum is worth $15 000 and a lemon is worth $3 000.
-(Scenario: Used-Car Market) Use Scenario: Used-Car Market.Adverse selection in this used-car market occurs because of:

A) asymmetric information.
B) risk-loving behaviour.
C) moral hazard.
D) diversification.