Used cars in Poorland sold for about 20% less than new cars of the same model manufactured in the same year. However, price differences were reduced when certified used-car dealers entered into the market for used cars in Poorland
What explains this phenomenon?
Used cars usually sell for less when compared to new cars manufactured in the same year because buyers are worried about the quality of used cars; only the sellers know about the true quality of a used car. Therefore, they are not willing to pay as much for a used car as they are for a new car. This is exactly what happened in Poorland before the entry of certified used-car dealers in the market. However, when certified used-car dealers entered into the market, buyers had better information about the quality of the cars and therefore, were willing to pay more for good-quality cars. This is an example of signaling.
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If the government decreases the tax on cell phones, ________
A) the deadweight loss decreases B) the consumer surplus does not change because sellers will not lower the price of a cell phone C) the number of cell phones purchased does not change D) the market becomes less efficient because the government collects less tax revenue
Economic growth is shown by
A) a point near the top of the production possibilities curve. B) a point outside the production possibilities curve. C) an inward shift of the production possibilities curve. D) an outward shift of the production possibilities curve.
Unlike implicit costs, explicit costs
a. reflect opportunity costs b. include the value of the owner's time c. are not included in the accounting statement of the firm d. are actual cash payments e. do not change with the output rate of the firm
Volatility
What will be an ideal response?