The market for used cars is shown in the above figure. Buyers cannot tell whether any given car is a lemon. The percent of all cars that are lemons is ?. What value of ? is necessary for all cars to be sold?
What will be an ideal response?
The sellers of good cars have a reservation price of $1,800. Setting $1,800 equal to the expected value of a car yields 1800 = (? ? 1,000 ) + ((1 - ?) ? 2,000 ) = 2,000 - (? ? 1,000 ).
So ? = 20%. Thus if ? ? 20%, all cars will be sold.
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Refer to Figure 16-6. If Sensei acts as a monopolist and charges the profit-maximizing price, what is the consumer surplus received by his customers?
A) the area A + C + H B) the area A + B + C + D C) the area A + B D) the area A + B + C + D + E
If a company offers a consultant the following five alternatives, which should she choose?
a. to be paid $50,000 now b. to be paid $30,000 now and $20,000 when the project in question is completed c. to be paid $25,000 now and $25,000 when the project in question is completed d. to be paid $10,000 now and $40,000 when the project in question is completed e. to be paid $50,000 when the project in question is completed
Recall the Application about the impact inflation has on your potential future salary and the repayment of student loans to answer the following question(s).According to this Application, more years of work would be required to pay off a student loan if all prices (including your salary):
A. remained stable. B. increased by 20 percent. C. decreased by 10 percent. D. increased by 40 percent.
Why do supporters of social regulation need to remember that “there is no free lunch”?
What will be an ideal response?