2. In Sacramento there are 1000 used cars for sale, half of them are good and half of them are lemons. Owners of lemons are willing to sell them for $200. Owners of good used cars are willing to sell them for prices above $1,100 but will keep them if the price is lower than $1,100. There is a large number of potential buyers who are willing to pay $500 for a lemon and $1,500 for a good car. Buyers can't tell good cars from bad, but original owners know. Pick the correct answer from the following options and briefly explain. a. There will be an equilibrium in which all used cars sell for $650. b. There will be an equilibrium in which lemons sell for $200 and good used cars sell for $1,100. c. There will be an equilibrium in which all used cars sell for $1,000. d. The only equilibrium is one in which all used cars on the market are lemons and they sell for $500. e. There will be an equilibrium in which lemons sell for $500 and good used cars sell for $1,500.

2. In Sacramento there are 1000 used cars for sale, half of them are good and half of them are lemons. Owners of lemons are willing to sell them for $200. Owners of good used cars are willing to sell them for prices above $1,100 but will keep them if the price is lower than $1,100. There is a large number of potential buyers who are willing to pay $500 for a lemon and $1,500 for a good car. Buyers can't tell good cars from bad, but original owners know. Pick the correct answer from the following options and briefly explain. a. There will be an equilibrium in which all used cars sell for $650. b. There will be an equilibrium in which lemons sell for $200 and good used cars sell for $1,100. c. There will be an equilibrium in which all used cars sell for $1,000. d. The only equilibrium is one in which all used cars on the market are lemons and they sell for $500. e. There will be an equilibrium in which lemons sell for $500 and good used cars sell for $1,500.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 10PA

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