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wrote...
Posts: 175
4 weeks ago



Figure 14.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of the used refrigerators in the market are lemons (low quality), how much will they be willing to pay for a used refrigerator?

▸ $100

▸ $200

▸ $250

▸ $300
Textbook 
Survey of Economics: Principles, Applications and Tools
Edition: 6th
Authors:
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14 Replies
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Answer verified by a subject expert
wrote...
Posts: 244
4 weeks ago
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$200
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wrote...
4 weeks ago



Figure 14.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), how many plums (high quality) will be supplied by sellers?

▸ 50

▸ 125

▸ 175

▸ 250
wrote...
4 weeks ago
50
wrote...
4 weeks ago
Thanks
wrote...
4 weeks ago



Figure 14.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), what fraction of used refrigerators sold will actually be lemons (low quality)?

▸ 50/300

▸ 250/300

▸ 50/250

▸ All of the refrigerators sold will be lemons.
wrote...
4 weeks ago
250/300
wrote...
4 weeks ago



Figure 14.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), what fraction of used refrigerators sold will actually be plums (high quality)?

▸ 50/250

▸ 250/300

▸ 50/300

▸ None of the refrigerators sold will be plums.
wrote...
4 weeks ago
50/300
wrote...
4 weeks ago
Thanks
wrote...
4 weeks ago



Figure 14.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. Initially buyers believe that 50% of used refrigerators in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer refrigerators are sold in equilibrium?

▸ 50

▸ 125

▸ 175

▸ 250
wrote...
4 weeks ago
175
wrote...
4 weeks ago



Figure 14.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. Compared to the situation when buyers have neutral expectations, if buyers believed that fewer than 50% of used refrigerators are lemons (low-quality):

▸ more plums (high-quality) used refrigerators would be on the market.

▸ fewer plums (high-quality) used refrigerators would be on the market.

▸ the same total number of used refrigerators would be on the market, but more of them would be plums (high-quality) used refrigerators.

▸ fewer lemons (low-quality) used refrigerators would be on the market.
wrote...
4 weeks ago
more plums (high-quality) used refrigerators would be on the market.
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