Figure 14.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. Initially buyers believe that 50% of used cameras in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer cameras are sold in equilibrium?
A. 10
B. 15
C. 20
D. 25
Answer: C
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To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
If the multiplier in the economy is 3, the marginal propensity to save (MPS) must be
A) 3. B) 0.67. C) 0.33. D) 1.
Since the Social Security system began in the 1930s, the number of workers per retiree
A) has stayed roughly the same. B) has declined. C) has risen. D) declined through 1960 and has risen ever since.
(Figure: Labor Market) Refer to the figure. What is the unemployment rate in this market as a result of the implementation of a $10 minimum wage?
What will be an ideal response?