You are in the market for a used 2013 Honda Accord. You know that half of the 2013 Accords are lemons and half are peaches. If you could be assured that the Accord you were buying was a peach, you would be willing to pay up to $10,000. On the other hand, you would only be willing to pay $2,000 for a lemon. You have no ability to discern whether any particular Accord is a lemon or a peach. Sellers of Accords, on the other hand, are likely to know whether their particular car is a lemon or a peach. Suppose sellers of lemons will sell their cars for $1,500 or more and peach sellers will be willing to sell their cars for $8,500 or more. You are willing to offer ________ for a car of unknown quality and ________ are willing to sell you their car.
A. $2,000; lemon owners only
B. $5,000; lemon owners only
C. $6,000; lemon owners only
D. $8,500; both lemon and peach owners
Answer: C
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Often the fee structure for electric companies are based off of the quantities that a customer consumes, and that on average the price of electricity falls as more electricity is consumed. This is an example of what type of price discrimination?
A. First-degree price discrimination. B. Second-degree price discrimination. C. Third-degree price discrimination. D. It is not price discrimination.
The idea that unequal incomes are unfair generally uses the ________ principle of fairness
A) big tradeoff B) involuntary exchange C) voluntary exchange D) it's not fair if the result isn't fair E) it's not fair if the rules aren't fair
If supply and demand both increase, the new equilibrium price will be ________ and the new equilibrium quantity will be ________.
A. higher; higher B. lower; uncertain C. lower; lower D. uncertain; higher
Game theory, which is used in studying oligopoly behavior, originated from the study of games such as the following, except:
A. Poker B. Solitaire C. Chess D. Bridge