Explain why "bad cars drive out the good ones" in the market for used cars
What will be an ideal response?
Suppose there are two kinds of cars available in the used car market: high-quality cars (peaches) and low-quality cars (lemons). All cars look exactly the same but there is asymmetric information; only the seller actually knows whether he has a lemon or a peach. If both peaches and lemons are available, buyers would not be willing to offer a very high price for a used car because there is a chance they are buying a lemon. The owners of peaches might be unwilling to sell at this price and so in equilibrium only lemons are bought and sold.
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What would be the economic dangers of eliminating patent protection in the pharmaceutical industry as a means of "eliminating monopoly power"?
What will be an ideal response?
Suppose that elasticity has been reliably measured as 1.55 and the unit price decreases from $20 to $17.50. How much will quantity demanded increase?
What will be an ideal response?
In the 1990s, our productivity grew by about ____ percent.
A. 16 B. 21 C. 32 D. 38
Recall the Application about the impact tariffs have on lower income households to answer the following question(s). Economists have found that tariffs in the United States fall most heavily on lower-income consumers. In the United States, tariffs are very high on textiles, apparel items and footwear, and within these categories the highest tariffs fall on the cheapest products. In general, to protect U.S. industries, tariffs are highest on labor-intensive goods.According to this Application, tariffs in the United States are very high on textiles, apparel items, and footwear, and within these categories tariffs are highest on the cheapest products. These tariffs disproportionately impact lower-income households because:
A. higher-income consumers tend to refuse to purchase products with tariffs. B. only lower-income consumers buy cheap, imported products. C. these cheaper products tend to be purchased by lower-income consumers. D. higher-income consumers can deduct the tariff from their income taxes.