Suppose that sellers value a good car at $10,500 and a bad car at $5,500, and quality is not observed by the buyers. What is the highest price that risk-neutral buyers will offer for a used car if they ignore adverse selection when 60 percent of the cars are good?
A. $8,000
B. $8,500
C. $10,500
D. $5,500
Answer: B
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If the price of orchids falls, the substitution effect due to the price change will cause
A) an increase in the quantity of orchids demanded. B) an increase in the demand for roses, a substitute for orchids. C) an increase in the quantity of orchids supplied. D) an increase in the demand for orchids.
Compare and contrast the two normative standards to income distribution discussed in the text: The productivity standard and the egalitarian principle
What will be an ideal response?
Brazil is able to produce 10 cars and 5 computers in one hour while India is able to produce 1 car and 4 computers in one hour. Brazil has a comparative advantage in producing _____________, and India has a comparative advantage in producing ________.
a) cars; cars b) computers; cars c) cars; computers d) computers; computers
Answer the following statements true (T) or false (F)
1. A budget deficit is another name for the public debt. 2. If the government runs a smaller budget deficit, then the public debt will decrease. 3. Only politicians, not the voters, are to blame for the problem of chronic budget deficits that many nations face. 4. Voters' preference for having government programs serve them is inherently in conflict with their preference to pay no taxes. 5. Monetary and fiscal policies are tools that the government can use to try to stabilize the economy.