For what values of x do all potential sellers sell the car

Reference no: EM13204217

Suppose that everyone is risk neutral, potential car buyers value lemons at $1,000 and good used cars at $3,000, the reservation price of lemon owners is $750, and the reservation price of owners of high quality used cars $1,750. The share of current owners who have lemons is x = 1/2 = 1,000/(1000+1000). For what values of x do all potential sellers sell their used cars? Describe the equilibrium.

Solve for all values of x such that all cars are sold, and describe the equilibrium.

Reference no: EM13204217

Questions Cloud

Make an example of a real-life word problem : Create an example of a real-life word problem, which can be solved using algebraic inequalities. Write the problem, and then solve the problem.

What does the capital asset pricing model claim : What does the capital asset pricing model claim it can do for the investor and In what situation might Mr. Jim want to lower the average beta of the fund that he manages? Explain Mr. Jim's reasoning

Explain why neither costs are priceless nor free : Master Card has a series of cute commercials that list a series of accounting items and costs leading to a priceless product. Cell phones are often advertised as being free. In economics, it is said that nothing of value is either free or priceles..

How many ways can a vending company purchase goods : A shipment of 25 television sets contains three defective units. In how many ways can a vending company purchase four of these units and receive

For what values of x do all potential sellers sell the car : Suppose that everyone is risk neutral, potential car buyers value lemons at $1,000 and good used cars at $3,000, the reservation price of lemon owners is $750, and the reservation price of owners of high quality used cars $1,750.

Why owning bonds is risky : Many think that owning bonds is not risky. List and briefly explain two specific reasons why owning bonds is risky and explain how an investor's risk aversion is reflected in a bond's maturity risk premium.

Determine the probability that the first card is a king : Find the probability that the first card is a King and the second card is a queen. Express your answer as a simplified fraction

How much more will alexx have than spenser : Many retirement funds charge and administrative fee equal to 0.25% on managed assets. Suppose that Alexx and Spenser each invest $5,000 in the same stock this year. Alexx invests directly and earns 5% a year. Spenser uses a retirement fund and ear..

What are the possible values for the first of the two number : The second number is 2 more than the first. What are the possible values for the first of the two numbers?

User Account

All Pages