The market for used cars is shown in the above figure. Ten percent (10%) of all cars are lemons. A mechanic is offering to inspect a car for sale and certify that a car is not a lemon
If car sellers are risk neutral, what is the highest price that a car seller would pay for such a service? Who would buy this service?
Lemon owners would not buy this service because they know that their cars would not pass the inspection. Sellers of good cars would receive $1,900 for their cars if this service did not exist, and $2,000 for their cars with this service. Thus, each owner of a good car would pay no more than $100 for this service. All good car sellers would buy this service since not being certified signals that a car is a lemon.
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Answer the following statement(s) true (T) or false (F)
1. The short run is any period of time less than one year, while the long run refers to a period of time one year or more in length. 2. The production function describes how much output a firm can generate for various cost levels. 3. Marginal and average products can be plotted in the same graph as total product costs. 4. In deriving the marginal product of labor, we consider the increase in output of an additional worker using additional capital. 5. In order to compute the total cost of production when labor is the only variable, we need only need to know the quantities of labor and the current wage rate.
When someone sells a bond at a discount, the holder of the bond earns ________ with the purchase
A) a capital gain B) a capital loss C) market value D) interest
In an ideal competitive market,
A. excludable goods are minimized. B. there are no depleteable goods. C. external benefits are maximized. D. social surplus is maximized.
The interest rate effect, the real balance effect, and the foreign purchases effect suggest that the aggregate demand curve is
A. downward sloping. B. vertical. C. shaped as a backward L. D. horizontal.