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There are three quality levels of cars on a used car market: = 80 ("bad") = 120 ("medium") = 200 ("good") The proportion of cars in the three quality levels is 1/3 each. Only the seller knows the quality level. The reservation prices of the sellers are each % of the quality level. The cars are sold to the highest bidder. Which statement is correct? Choose an answer O 1. An equilibrium price is 200. O 2. An equilibrium price is 90. O 3. An equilibrium price is 100. O 4. An equilibrium price is 120. O 5. Aoequiliacium price ie 13 1/3

There are three quality levels of cars on a used car market: = 80 ("bad") = 120 ("medium") = 200 ("good") The proportion of cars in the three quality levels is 1/3 each. Only the seller knows the quality level. The reservation prices of the sellers are each % of the quality level. The cars are sold to the highest bidder. Which statement is correct? Choose an answer O 1. An equilibrium price is 200. O 2. An equilibrium price is 90. O 3. An equilibrium price is 100. O 4. An equilibrium price is 120. O 5. Aoequiliacium price ie 13 1/3

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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There are three quality levels of cars on a used car market: = 80 ("bad") 120 ("medium") = 200 ("good") %3D The proportion of cars in the three quality levels is 1/3 each. Only the seller knows the quality level. The reservation prices of the sellers are each ¾ of the quality level. The cars are sold to the highest bidder. Which statement is correct? Choose an answer O 1. An equilibrium price is 200. 2. An equilibrium price is 90. O 3. An equilibrium price is 100. O 4. An equilibrium price is 120. O 5. Aoequilibrcium price ie 132 1/3.
Transcribed Image Text:There are three quality levels of cars on a used car market: = 80 ("bad") 120 ("medium") = 200 ("good") %3D The proportion of cars in the three quality levels is 1/3 each. Only the seller knows the quality level. The reservation prices of the sellers are each ¾ of the quality level. The cars are sold to the highest bidder. Which statement is correct? Choose an answer O 1. An equilibrium price is 200. 2. An equilibrium price is 90. O 3. An equilibrium price is 100. O 4. An equilibrium price is 120. O 5. Aoequilibrcium price ie 132 1/3.
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