Business, 13.12.2019 05:31, sylviaswanson1
There is a market with 100 people who want to sell their used cars and 100 people who want to buy a used car. it is well known generally that half the cars are lemons and half are plums. the current owner of a car (for sale) knows its quality but none of the prospective buyers know if a given car is a lemon or a plum. the owner of a lemon is willing to accept $500 and the owner of a plum is willing to accept $1,000. the buyers of a lemon are willing to pay $600 and the buyers of a plum are willing to pay $1,200.
(i) given buyers offer a price equal to the expected quality of used cars, how many sales ("trades") will take place in the market, and of whattype of quality (i. e., lemons or plums)?
(ii) what is the maximum amount of consumer surplus created from the sales?
Answers: 2
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1. which one of the following would be an example of a supply-side market failure? a. a gas station is slowly leaking diesel fuel from its underground tanks, and after the leak is discovered, the business immediately cleans up the pollution at its own expense. b. a gas station is slowly leaking diesel fuel from its underground tanks, but the state uses taxpayer money to clean up the pollution rather than requiring the business to pay. c. your business wants to attract repeat customers by putting on a customer-appreciation picnic at a public park, but you decide not to because you couldn't prevent noncustomers from consuming the food and entertainment you provided. d. everyone rushes to the local retail outlet at midnight on the day of the release of a new video game console, and the store runs out before everyone is able to buy one.
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