Used car buyers will believe that a car is of good quality when the seller signals the car's high quality by offering a warranty when A. warranties are only offered on lemons. B. warranties are offered on all cars. C. a warranty on a lemon is costly to the seller. D. a warranty on a good car is a false signal.

Question

Sophie

Business

29 June, 19:28

Used car buyers will believe that a car is of good quality when the seller signals the car's high quality by offering a warranty when A. warranties are only offered on lemons. B. warranties are offered on all cars. C. a warranty on a lemon is costly to the seller. D. a warranty on a good car is a false signal.

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Answers (1)

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Jakob Moody · Answer 1

The answer is: C) a warranty on a lemon is costly to the seller.

Explanation:

In order for a car to be considered a lemon it usually must have

a substantial defect which is covered by the manufacturers warranty and occurs within a certain time of being purchased (in some states up to 2 or more years) continues to have the same defect after a certain number of repair attempts (usually 3 or more repair attempts in most states).

When you buy a used car the lemon laws don't apply unless the car dealer issues an express written warranty with the car. Since car repairs are usually expensive, specially when dealing with substantial defects, a used car dealer will not issue a warranty on a bad car.

In case you buy a used car that comes with a written warranty by the seller it usually means you are buying a high quality car. No dealer will want to pay for expensive repairs or even risk a refund with a lemon car.