If a consumer is willing to pay $5,000 for a used car that is a free of mechanical problems and $1,000 for a used car that will require extensive repairs, the consumer will offer:

A. $5,000 for a used car if the probability that it is free of mechanical problems is 50 percent.
B. $3,000 for a used car if the probability that it is free of mechanical problems is 50 percent.
C. $6,000 for a used car if the probability that it is free of mechanical problems is 50 percent.
D. $1,000 for a used car if the probability that it is free of mechanical problems is 50 percent.


Answer: B

Economics

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