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In the Market for Used Cars,the Lemons Model Predicts That A)sellers

Question 90
Multiple Choice

In the market for used cars,the lemons model predicts that A)sellers will always overstate the condition of their cars. B)buyers will always overstate their reservation price. C)sellers are more likely to sell low quality than high quality cars. D)sellers will always understate the condition of their cars.

Related questions
Q 91
The lemons model predicts that the market price of used cars will be _______ than the market value of used cars of average condition,therefore attracting _______ cars into the market. A)greater;better than average B)lower;better than average C)equal to;only average D)lower;worse than average
Q 92
Consumers know that some fraction X of all new cars produced and sold in the market are defective.The defective ones cannot be identified except by those who own them.Assume for this problem that cars do not depreciate with use. Suppose the consumers are risk-neutral with a reservation price of a used car $6,000.Good used cars are worth $8,000 and lemon used cars are worth $2,000 to their owners.What is the fraction X? A)0.25 B)0.33 C)0.5 D)0.67
Q 93
Consumers know that some fraction X of all new cars produced and sold in the market are defective.The defective ones cannot be identified except by those who own them.Assume for this problem that cars do not depreciate with use. Suppose that good used cars are worth $10,000 and lemon used cars are worth $5,000 to their owners.If X = 20%,how much a risk-neutral consumer would be willing to pay for a used car? A)$10,000 B)$9,000 C)$8,000 D)$7,000
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