Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. If buyers believe that 50% of used cameras in the market are lemons (low quality), what fraction of used cameras sold will actually be lemons (low quality)?
A. 10/25
B. 10/35
C. 25/35
D. All of the cameras sold will be lemons.
Answer: C
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Patents
A) are a legal barrier to entry. B) remove legal barriers to entry. C) create economies of scale. D) decrease the incentive to innovate. E) are prohibited in the United States.
If Stock A and Stock B both decrease in value at the same time, they are
A) negatively correlated. B) uncorrelated. C) positively correlated. D) bad bets.
What is the effect on the rate of inflation of the Federal Reserve printing large quantities of currency?
A. increases the rate. B. has no effect on rate. C. decreases the rate.
When the amount supplied is greater at each price, there is a(n)
A) rightward shift in the supply curve. B) leftward shift in the supply curve. C) upward movement along the supply curve. D) downward movement along the supply curve.