8 In Section 8.4 we studied the case of a government-mandated ban on the sale of low- quality cars. Review the basic assumptions of the Akerlof model, assume that car quality X, is distributed uniformly from 0 to 100, and assume that the buyer and seller utility functions are as originally supposed in equation (8.1). a Let the government-mandated minimum quality be denoted as B. If B = 50, this means car i can only be offered on the market if X; > 50. What is the range of prices, if any, that would allow transactions if B=50?

8 In Section 8.4 we studied the case of a government-mandated ban on the sale of low- quality cars. Review the basic assumptions of the Akerlof model, assume that car quality X, is distributed uniformly from 0 to 100, and assume that the buyer and seller utility functions are as originally supposed in equation (8.1). a Let the government-mandated minimum quality be denoted as B. If B = 50, this means car i can only be offered on the market if X; > 50. What is the range of prices, if any, that would allow transactions if B=50?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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