Suppose buyers in the used car market are willing to pay $4,000 for a plum (high-quality) used car and $2,000 for a lemon (low-quality) used car. If buyers believe that 50% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?
A. $2000
B. $3000
C. $3500
D. $4000
Answer: B
You might also like to view...
Inflation results
(a) when the price of one good or service increases. (b) when too much money is chasing too few goods. (c) when prices, on average, decrease across the economy. (d) when banks decrease lending.
Suppose that the economy is currently at full employment. All other things being equal, if the government implements restrictive policies then the appropriate monetary policy is
a. no change from the current policy. b. reduce the growth of the money supply. c. constant growth of the money supply. d. increase the growth of the money supply.
Which of the following statements is false? An economic analysis of carbon taxes can:
A. predict the effect on unemployment in West Virginia coal mining communities. B. conclude that such taxes should be imposed to benefit future generations. C. present a trade-off of the costs and benefits of different levels of carbon taxes. D. calculate the increase in costs faced by coal-using industries. compare the likely reductions in medical expenditures on diseases caused by smog.
A U.S. retailer buys shoes from an Italian company. The Italian firm then uses all of the revenues to buy leather from the U.S. These transactions
a. increase both U.S. net exports and U.S. net capital outflow. b. decrease both U.S. net exports and U.S. net capital outflow. c. increase U.S. net exports and do not affect U.S. net capital outflow. d. None of the above is correct.