Ow asymmetric information prevents gains from trade Neha sees a classified ad from Lorenzo offering a used lawn mower for $30. On the opposite page, she sees a big color ad from a national home improvement chain offering a new lawn mower for $250. Neha values a lawn mower at $270 as long as it works, regardless of whether it is new or used. For each of the scenarios listed, determine the principle illustrated by each person's reasoning. Moral Adverse Scenario Hazard Selection Suppose Lorenzo, the seller of the lawn mower, knows the mower is in good condition he is only selling it because he has decided to replace his lawn with a new deck. He thinks about asking $45 and offering a guarantee He will replace the lawn mower with a new $250 lawn mower if it turns out not to work. Then he thinks, "That's not a good idea! Someone can just buy it, handle it carelessly, and, if it breaks, can pretend it didn't work and get a new lawn mower for $45-meanwhile, I'll be out $205!" Suppose Neha buys the new lawn mower from the national home improvement chain, thinking "Someone would ask $30 for a used lawn mower only if it didn't work well." Why is Lorenzo unable to sell Neha the lawn mower? Check all that apply a. Adverse selection can cause buyers to avoid purchasing high-quality goods because of uncertainty about their quality. b. Moral hazard can prevent sellers from offering guarantees of quality, because they can't be sure that buyers won't try to take advantage of the guarantees by filing false claims.