Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. Initially buyers believe that 50% of used digital cameras in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer digital cameras are sold in equilibrium?
A. 90
B. 110
C. 140
D. The number of cameras sold in equilibrium is the same as the outcome with neutral expectations.
Answer: C
Economics
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