Suppose that there are two types of houses for sale: those with solid foundations and those with cracked foundations. In all other respects, the two types of houses are identical. Houses with solid foundations are worth $200,000, while those with cracked foundations are worth $200,000 minus the $20,000 to fix the crack, or $180,000. Sellers know which type of house they have, but buyers cannot detect whether the foundation has a crack. Suppose that 80 percent of the houses for sale have a solid foundation and 20 percent of the houses for sale have a cracked foundation. If buyers are risk-neutral and know the that 80 percent of the houses for sale have a solid foundation while 20 percent have a cracked foundation, then the owners of houses with a solid foundation will find that:
A. potential buyers are offering $180,000.
B. potential buyers are offering $200,000.
C. it is not worthwhile to sell their houses.
D. potential buyers are offering more than $200,000.
Answer: C
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Since 1999, the number of small state-owned enterprises (SOEs) in China has
A) decreased, but the large SOEs continue to hold a large proportion of industrialized assets. B) increased, but large SOEs has decreased. C) decreased along with the large SOEs. D) remained unchanged.
Which of the following industrial policies are effective for developing countries to deal with inflows of capital from overseas?
A. Import substitution, export-led growth, and clustering. B. Import substitution, export-led growth, and crowding out. C. Import substitution, government subsidy, and clustering. D. Market Substitution, government subsidy, and crowding out.
The law of demand (downward-sloping demand curve)is based on the idea of
a. maximum total utility b. minimum marginal utility c. total utility divided by quantity of the good consumed d. law of diminishing marginal utility e. consumers minimize total utility
Suppose that the supply curve for a good is vertical. In this case we would expect
A. a tax placed on the buyer to be borne entirely by the seller. B. nothing to be sold so no tax is collected. C. a tax placed on the buyer to be borne entirely by the buyer. D. the tax to be shared equally by both buyer and seller.