Suppose that buyers assume that there is a 30% chance of getting a plum, and 8 of 10 cars in the used car market are lemons. Is this an equilibrium?
What will be an ideal response?
No, buyers are underestimating the probability of getting a lemon by 10%. If buyers pay the amount of money that they are willing to spend in a market with a 30% chance of a plum they will be disappointed with the outcome of their purchases on average. This means that buyers have to reduce their willingness to pay until the outcome is consistent with their expectations.
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If actual inflation is less than expected inflation, what is the relationship between the actual real wage and the expected real wage?
A) The actual real wage is higher than the expected real wage. B) The actual real wage is lower than the expected real wage. C) The actual real wage is equal to the expected real wage. D) The relationship between the actual real wage and the expected real wage cannot be predicted.
Total utility can be objectively measured in numbers that indicate usefulness or benefit to the consumer
a. True b. False Indicate whether the statement is true or false
Recessionary gap is the amount by which the equilibrium level of real GDP exceeds potential GDP.
Answer the following statement true (T) or false (F)
Marginal cost is a good measure of
A. what society gains by using resources to produce more of a good or service. B. what society gives up by using resources to produce more of a good or service. C. the social value of a marginal unit of a good. D. the least costly way to produce all units of a good.