Q 24

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 $1,100 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 $600 for a lemon and $1,700 for a good car. Buyers can't tell good cars from bad, but original owners know.
A) There will be an equilibrium in which all used cars sell for $800.
B) There will be an equilibrium in which lemons sell for $500 and good used cars sell for $1,100.
C) There will be an equilibrium in which all used cars sell for $1,150.
D) The only equilibrium is one in which all used cars on the market are lemons and they sell for $600.
E) There will be an equilibrium in which lemons sell for $600 and good used cars sell for $1,700.

Q 25

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 8,000 used cars on the market is such that the number of used cars of value less than V is . Original owners must sell their used cars. Original owners know what their cars are worth, but buyers can't determine a car's quality until they buy it. An owner can either take his car to an appraiser and pay the appraiser $100 to appraise the car (accurately and credibly) or sell the car unappraised. In equilibrium, car owners will have their cars appraised if and only if the car's value is at least
A) $100.
B) $4,000.
C) $300.
D) $200.
E) $400.

Q 26

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 6,000 used cars on the market is such that the number of used cars of value less than V is . Original owners must sell their used cars. Original owners know what their cars are worth, but buyers can't determine a car's quality until they buy it. An owner can either take his car to an appraiser and pay the appraiser $400 to appraise the car (accurately and credibly) or sell the car unappraised. In equilibrium, car owners will have their cars appraised if and only if the car's value is at least
A) $1,200.
B) $3,000.
C) $400.
D) $800.
E) $1,600.