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Determining the asymmetric information

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Jennifer is looking to sell her one-person Laser sail boat, which she has kept in excellent condition. Ordinarily this type of sail boat sells second-hand for $4,000 but as Jennifer has looked after hers extremely well, she will only want to sell it for $4,600. Tom is looking to buy a second-hand sail boat and is willing to pay up to $4,900 for a boat in excellent condition. Tom has no inexpensive way to determine whether Jennifer's boat is in good condition or not. Answer the following questions:

-Thinking like an economist, would Tom definitely buy the boat from Jennifer? . Type Y for Yes or N for No.

-What is the DWL as a result of the inefficiency caused by the asymmetric information, if Tom did not buy the boat at Jennifer's price? $. Answer to the nearest whole dollar (with no decimal places).

-Over the next few months, if the proportion of sailboats on the market that are in poor condition rises from 78% to 86%, the second hand market for these sail boats best fits what description? . Type in M for Moral hazard, A for Asymmetric information, C for Competitive market, L for Lemons Model, P for Principal agent issue.

Reference no: EM132542203

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