Question

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.

Answer 1

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

Step-by-step explanation:

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

1. 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)
2. 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.