Biology Forums - Study Force

Figure 14.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 80% of used cameras in the market are lemons (low quality), what is consumers' willingness to pay ($X)?

▸ $5,000

▸ $3,400

▸ $3,000

▸ $1,700

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Figure 14.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 80% of used cameras in the market are lemons (low quality), how many plums will be supplied in the market?

▸ 30

▸ 40

▸ 70

▸ 120

40

Figure 14.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 80% of used cameras in the market are lemons (low quality), what percent of used cars sold will actually be plums?

▸ 20%

▸ 25%

▸ 33.33%

▸ 75%

20%

Figure 14.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. Initially buyers believe that 80% of used cameras in the market are lemons (low quality). Compared to the outcome with these initial expectations, how many fewer cars are sold in equilibrium?

▸ 50

▸ 80

▸ 110

▸ The number of cars sold in equilibrium is the same as the outcome with neutral expectations.

The number of cars sold in equilibrium is the same as the outcome with neutral expectations.