Can you check my answers?Respond to the question with a concise and accurate answer, along with a clear explanation and step-by-step solution, or risk receiving a downvote. In the late 1990s, car leasing was very popular in the United States. A customer would lease a car from the manufacturer for a set term, usually twoyears, and then have the option of keeping the car. If the customer decided to keep the car, the customer would pay a price to the manufacturer, the"residual value," computed as 60% of the new car price. The manufacturer would then sell the returned cars at auction. In 1999, manufacturers lostan average of $480 on each returned car (the auction price was, on average, $480 less than the residual value).Suppose two customers have leased cars from a manufacturer. Their lease agreements are up, and they are considering whether to keep (andpurchase at 60% of the new car price) their cars or return their cars. Two years ago, Rosa leased a car that was valued new at $13,500. If she returnsthe car, the manufacturer could likely get $6,885 at auction for the car. Larry also leased a car, valued new at $14,000, two years ago. If he returnsthe car, the manufacturer could likely get $9,800 at auction for the car.Use the following table to indicate whether each buyer is more likely to purchase or return the car.Buyer Keep and Purchase Car Return CarLarryRosaThe manufacturer will lose money (at auction, relative to the residual value of the car) if Rosait.True or False: Setting a more accurate residual price of each car would help attenuate the problems of adverse selection.Truereturns the car instead of keeping and purchasingFalse

Use the following table to indicate whether each buyer is more likely to purchase or return the car. Buyer Keep and Purchase Car Return Car Larry Rosa The manufacturer will lose money (at auction, relative to the residual value of the car) if Rosa returns the car instead of keeping and purchasing it. True or False: Setting a more accurate residual price of each car would help attenuate the problems of adverse selection. O True O False

Use the following table to indicate whether each buyer is more likely to purchase or return the car. Buyer Keep and Purchase Car Return Car Larry Rosa The manufacturer will lose money (at auction, relative to the residual value of the car) if Rosa returns the car instead of keeping and purchasing it. True or False: Setting a more accurate residual price of each car would help attenuate the problems of adverse selection. O True O False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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