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. If buyers believe that 50% of used cameras in the market are lemons (low quality), what fraction of used cameras sold will actually be lemons (low quality)?

A. 10/25
B. 10/35
C. 25/35
D. All of the cameras sold will be lemons.


Answer: C

Economics

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