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Assume the market for used cars is set up as in the table below. There are two types of cars: lemons and peaches. Peaches are more reliable than lemons and thus have a higher value to both buyers and sellers. Sellers know the quality of their car, but buyers cannot distinguish between the two. Buyers are risk neutral and only care about the average quality of the cars on the market. Assume that the seller has more bargaining power and cars will sell at the buyer’s value. Everyone has the information in the table, but the buyers only know the percentage of cars that are lemons. Perfection Information Prices Peach (reliable) Lemon (unreliable) Buyer’s Value $15,000 $10,000 Seller’s Value $13,000 $8,000 Suppose 20% of the cars are lemons. At what price will cars sell? Input only your numerical answer below. Give the number only with no dollar sign.
Suppose you are hired by the Martin Guitar Company as an economic consultant. You estimate the demand to be Q=8000-2P. Suppose the supply of Martin Guitars is given by Q= -2000+3P. Suppose a per-unit excise tax of $40 per guitar is levied on the cons..
Midwest Media Inc. is a broadcasting firm that owns and operates radio and television stations in the Midwest. The firm is currently considering the purchase of a proximate fast food chain that is experiencing financial difficulty. What recommendatio..
Dale goes to the opera and ice hockey games. Draw a budget line for Dale. If the government imposes a 25% income tax on her, what happens to her budget line and opportunity set?
Discuss the social and economic effects of colonization? How did it contribute the “Price revolution”? What were the main tenets of bullionism/mercantilism? What policies and events combined to bring an end to the Spanish hegemony?
Three-year property class type equipotent bought for $30,000 is being disposed of $20,000 at the end of three years. The company is at a 35% tax bracket. Compute the tax consequence, if any for this equipment.
Consider a firm for which production depends on two normal inputs, labor and capital, that are not perfect complements. Initially the firm faces market prices of w = 10 and r = 8, for labor and capital. In which direction will the substitution effect..
elucidate how many popsicles will be sold each day in the short run if the price rises
The terms of trade between two countries refer to
Illustrate what is the effective rate of protection on the process of turning corn into ethanol.
Rose is a Project Manager at the civil engineering consulting firm of Sands, Gravel, Concrete, and Waters, Inc. She has been collecting data on a project however not all the data is available. She has been able to find out that the 10th pillar requir..
At the 0.05 level of significance, is there evidence that the population mean force is greater than 1,500 pounds? What assumption about the population distribution is needed in order to conduct the "t test" in (a)?
Upon his employment at the age of 22, Robert began to make a series of equal year –end deposits of $1100 to his retirement fund. After working for 5 years, he is now able to increase his saving. He plans to increase his annual deposits to $2200, star..
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