Paul is looking for a used washing machine. He has posted his requirement in an exchange Web site and has also mentioned the maximum amount that he is willing to pay for it
If his willingness to pay is lower than the price of good-quality used washing machines, what is likely to happen?
Paul's advertisement is likely to attract sellers of low-quality washing machines. This is because Paul's willingness to pay is well below the market price of high-quality used washing machines. Good-quality washing machines are valued at high prices and therefore owners of these machines will not be willing to sell at the price quoted by Paul. This is an example of adverse selection.
You might also like to view...
Suppose there are only two firms in an economy: Cowhide, Inc produces leather and sells it to Couches, Inc, which produces and sells leather furniture. With each $1,000 worth of leather that it buys from Cowhide, Inc, Couches, Inc produces a couch and sells it for $2,600 . Neither firm had any inventory at the beginning of 2015 . During that year, Cowhide produced enough leather for 25 couches
Couches, Inc bought 80% of that leather for $20,000 and promised to buy the remaining 20% for $5,000 in 2016 . Couches, Inc produced 20 couches during 2015 and sold each one during that year for $2,600 . What was the economy's GDP for 2015? a. $25,000 b. $52,000 c. $57,000 d. $65,000
Comparative advantage refers to a country's:
A. Ability to produce a specific good with fewer resources than another country. B. Monopoly power in the world market for a specific good. C. Ability to sell a specific good for a higher price than another country. D. Ability to produce a specific good at a lower opportunity cost than another country.
We cannot predict the effect on the market clearing price, but know that the equilibrium quantity will increase when
A) supply increases and demand decreases. B) supply and demand for a product simultaneously decrease. C) supply and demand for a product simultaneously increase. D) supply decreases and demand increases.
If the most someone is willing to pay for ticket to see their favorite team is $100 and the market price of the ticket is $35, then this buyer will get consumer surplus of
A. 1 ticket. B. $35. C. $65. D. $100.