If buyers cannot distinguish between "lemons" and "cherries" in the used car market but sellers can, the price buyers are willing to pay for used cars will be:
A. high enough to guarantee that at least 50 percent of the used cars offered for sale are "cherries."
B. equal to zero since no one will take the chance of purchasing a "lemon" even if the value of a car known to be a lemon is greater than zero.
C. so low that sellers with "cherries" will be unwilling to sell.
D. so low that sellers with "lemons" will be unwilling to sell.
Answer: C
You might also like to view...
Refer to Figure 12-1. If the firm is producing 200 units
A) it should increase its output to maximize profit. B) it is making a loss. C) it breaks even. D) it should cut back its output to maximize profit.
The price elasticity of demand for a variable input will be greater
A) the fewer substitutes there are for the final product. B) the easier it is for a particular input to be substituted for by other inputs. C) the lower the price elasticity of supply of all other inputs. D) the smaller the proportion of total costs accounted for by a particular variable input.
A year-long drought that destroys most wheat crops for the season would shift the:
A. short-run aggregate supply curve only. B. aggregate demand curve only. C. aggregate demand curve, and the short-run aggregate supply curve would shift in response. D. short-run aggregate supply curve and the long-run aggregate supply curve.
Refer to the given information. The marginal resource (labor) cost of the third worker is:
Answer the question on the basis of the following supply information facing a single firm in a particular labor market:
A. $15.
B. $25.
C. $35.
D. $45.