Figure 14.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), how many lemons (low quality) will be supplied by sellers?
A. 50
B. 125
C. 175
D. 250
Answer: D
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In the permanent-income hypothesis incorporating rational expectations, the short-run MPC is high when changes in current income
A) are small. B) are considered a good predictor of future income changes. C) are considered a poor predictor of future income changes. D) occur when the economy is nearing cyclical peaks or troughs.
Mrs. Smith operates a business in a competitive market. The current market price is $7.50 . At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25 . Mrs. Smith should
a. shut down her business in the short run but continue to operate in the long run. b. continue to operate in the short run but shut down in the long run. c. continue to operate in both the short run and long run. d. shut down in both the short run and long run.
In the United States, the incidence of poverty has declined since the 1970s.
Answer the following statement true (T) or false (F)
Suppose GDP is $16 trillion, with $10 trillion coming from consumption, $2 trillion coming from gross investment, $3.5 trillion coming from government expenditures, and $500 billion coming from net exports. Also suppose that across the whole economy, depreciation (consumption of fixed capital) totals $1 trillion. From these figures, we see that net domestic product equals:
a. $17.0 trillion. b. $16.0 trillion. c. $15.5 trillion. d. None of the above