Question 20 Consider a used-car market with asymmetric information. The owners of used cars know what their vehicles are worth but have noway of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they arebeing offered may be a low-quality "lemon."Instructions: Enter your answers as a whole number.a. Suppose that there are equal numbers of good and bad used cars in the market. Good used cars are worth $13,000, and bad usedcars are worth $5,000. What is the average value of a used car?2$b. By how much does the average value exceed the value of a bad used car?24By how much does the value of a good used car exceed the average value?2$c. Would a potential seller of a good used car be willing to accept the average value as payment for the vehicle?|(Click to select) ▼d. If a buyer negotiates with a seller to purchase the seller's used car for a price equal to the average, is the car more likely to be goodor bad?(Click to select) ve. Will the used-car market come to feature mostly-if not exclusively-lemons?(Click to select)How much will each used car end up costing if all the good cars are withdrawn from the market? way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they arebeing offered may be a low-quality “lemon."Instructions: Enter your answers as a whole number.a. Suppose that there are equal numbers of good and bad used cars in the market. Good used cars are worth $13,000, and bad usedcars are worth $5,000. What is the average value of a used car?%24b. By how much does the average value exceed the value of a bad used car?%$4By how much does the value of a good used car exceed the average value?%24c. Would a potential seller of a good used car be willing to accept the average value as payment for the vehicle?(Click to select)d. If a buyer negotiates with a seller to purchase the seller's used car for a price equal to the average, is the car more likely to be goodor bad?(Click to select) ▼e. Will the used-car market come to feature mostly–if not exclusively–lemons?|(Click to select) -How much will each used car end up costing if all the good cars are withdrawn from the market?24

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Consider a used-car market with asymmetric information. The owners of used cars know what their vehicles are worth but have no way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they are being offered may be a low-quality "lemon." Instructions: Enter your answers as a whole number. a. Suppose that there are equal numbers of good and bad used cars in the market. Good used cars are worth $13,000, and bad used cars are worth $5,000. What is the average value of a used car? %24 b. By how much does the average value exceed the value of a bad used car? 24 By how much does the value of a good used car exceed the average value? 2$ c. Would a potential seller of a good used car be willing to accept the average value as payment for the vehicle? (Click to select) v

Consider a used-car market with asymmetric information. The owners of used cars know what their vehicles are worth but have no way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they are being offered may be a low-quality "lemon." Instructions: Enter your answers as a whole number. a. Suppose that there are equal numbers of good and bad used cars in the market. Good used cars are worth $13,000, and bad used cars are worth $5,000. What is the average value of a used car? %24 b. By how much does the average value exceed the value of a bad used car? 24 By how much does the value of a good used car exceed the average value? 2$ c. Would a potential seller of a good used car be willing to accept the average value as payment for the vehicle? (Click to select) v

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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