In Rustbucket, Michigan, There Are 200 Used Cars for Sale;

Question 23
Multiple Choice

In Rustbucket, Michigan, there are 200 used cars for sale; half of these cars are good and half of them are lemons. Owners of lemons are willing to sell them for $500. Owners of good used cars are willing to sell them for prices above $1,300 but will keep them if the price is lower than $1,300. There is a large number of potential buyers who are willing to pay $600 for a lemon and $2,300 for a good car. Buyers can't tell good cars from bad, but original owners know. A) There will be an equilibrium in which lemons sell for $500 and good used cars sell for $1,300. B) There will be an equilibrium in which all used cars sell for $1,450. C) The only equilibrium is one in which all used cars on the market are lemons and they sell for $600. D) There will be an equilibrium in which all used cars sell for $900. E) There will be an equilibrium in which lemons sell for $600 and good used cars sell for $2,300.