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1. (3pts) Consider a modified version of solved problem 19.1 in the textbook. As before, suppose everyone is risk neutral and let ₂ be the proportion of used cars that are low-quality (lemons). Assume buyers value lemons at $2,000 and peaches at $10,000. The reservation price of owners is $1,000 for lemons and $6,000 for peaches. For what values of 6, do all used cars sell? 1/4 (a) Any (b) Only ₁ = 2/3 (c) Any 0 1/2 (d) Any 0 ≤2/3

1. (3pts) Consider a modified version of solved problem 19.1 in the textbook. As before, suppose everyone is risk neutral and let ₂ be the proportion of used cars that are low-quality (lemons). Assume buyers value lemons at $2,000 and peaches at $10,000. The reservation price of owners is $1,000 for lemons and $6,000 for peaches. For what values of 6, do all used cars sell? 1/4 (a) Any (b) Only ₁ = 2/3 (c) Any 0 1/2 (d) Any 0 ≤2/3

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. (3pts) Consider a modified version of solved problem 19.1 in the textbook. As before, suppose everyone is risk neutral and let ₂ be the proportion of used cars that are low-quality (lemons). Assume buyers value lemons at $2,000 and peaches at $10,000. The reservation price of owners is $1,000 for lemons and $6,000 for peaches. For what values of 6, do all used cars sell? 1/4 (a) Any (b) Only ₁ = 2/3 (c) Any 0 1/2 (d) Any 0 ≤2/3
Transcribed Image Text:1. (3pts) Consider a modified version of solved problem 19.1 in the textbook. As before, suppose everyone is risk neutral and let ₂ be the proportion of used cars that are low-quality (lemons). Assume buyers value lemons at $2,000 and peaches at $10,000. The reservation price of owners is $1,000 for lemons and $6,000 for peaches. For what values of 6, do all used cars sell? 1/4 (a) Any (b) Only ₁ = 2/3 (c) Any 0 1/2 (d) Any 0 ≤2/3
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