1) Consider a market in which some high-quality goods are sold, but not as many as if there was perfect information about the quality of the good. This type of market is known as a: A) beneficial selection. B) thin market. C) symmetric market. D) efficient market.
21) Consider a market in which some high-quality goods are sold, but not as many as if there was perfect information about the quality of the good. This type of market is known as a:
A) beneficial selection.
B) thin market.
C) symmetric market.
D)
22) Asymmetric information occurs:
A) only in used good markets.
B) only in new good markets.
C) in the markets for new and used goods.
D) only in public good markets.
23) Explain the two predictions made by the lemons model.
24) The adverse selection problem happens when an informed buyer or seller must choose from an undesirable selection of goods.
25) Asymmetric information occurs if John who is buying Kim's used Toyota Corolla has the same amount of information as Kim.
26) Symmetric information occurs when both buyers and sellers have imperfect information.
27) According to studies, used pickup trucks less than 10 years old that are being sold are less reliable than those not being sold.
28) Suppose that in a small town 40 used cars are sold each month. Of the 40 cars sold, 30 are lemons and 10 are plums. If consumers expect 50% of the used cars sold to be lemons, this market is in equilibrium.
29) Suppose that in a small town 40 used cars are sold each month. Of the 40 cars sold, 30 are lemons and 10 are plums. If consumers expect 50% of the used cars sold to be lemons, we can expect the price that buyers are willing to pay to fall over time.
30) The result of adverse selection is that the presence of high-quality goods in the market drive low-quality goods out of the market.
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