You are in the market for a used 2013 Honda Accord. You know that half of the 2013 Accords are lemons and half are peaches. If you could be assured that the Accord you were buying was a peach, you would be willing to pay up to $10,000. On the other hand, you would only be willing to pay $2,000 for a lemon. You have no ability to discern whether any particular Accord is a lemon or a peach. Sellers of Accords, on the other hand, are likely to know whether their particular car is a lemon or a peach. Suppose sellers of lemons will sell their cars for $1,500 or more and peach sellers will be willing to sell their cars for $8,500 or more. Over time the price in the market for 2013 Accords will ________ and ________ will be traded.
A. be between $1,500 and $2,000 for lemons; only lemons
B. be between $8,500 and $10,000; only peaches
C. be between $1,500 and $10,000; both lemons and peaches
D. be between $8,500 and $10,000 for peaches and between $1,500 and $2,000 for lemons; both lemons and peaches
Answer: A
You might also like to view...
Assume that peanut butter and jelly are complementary goods. A decrease in the number of peanut butter suppliers will cause the
a. demand for peanut butter to increase b. supply of peanut butter to increase c. demand for jelly to increase d. demand for jelly to decrease e. supply of jelly to decrease
A tax imposed on the buyers of a good will lower the
a. price paid by buyers and lower the equilibrium quantity. b. price paid by buyers and raise the equilibrium quantity. c. effective price received by sellers and lower the equilibrium quantity. d. effective price received by sellers and raise the equilibrium quantity.
?Assume the economy is experiencing an inflationary gap, classical economists believe that:
A. ?flexible wages will restore full employment. B. ?the federal government should decrease spending to shift the aggregate demand curve leftward. C. ?the Federal Reserve should lower the interest rate. D. ?the federal government should increase spending to shift the aggregate demand curve rightward.
A reduction in the cost of cable TV subscriptions will ________ the ________ for televisions
A) decrease; supply B) decrease; demand C) increase; supply D) increase; demand E) None of the above is correct.