Figure 14.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of the used bikes are lemons (low quality), how much will they be willing to pay for a used bike?
A. $50
B. $80
C. $125
D. $200
Answer: C
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