Assume that both high and low quality appliances are sold in the ...

[Shelles]

Assume that both high and low quality appliances are sold in the used appliance market. If we assume asymmetric information with sellers having more information regarding quality than buyers, which of the following is necessarily true? The
 
  A) fraction of high quality appliances will be greater than under perfect knowledge.
  B) fractions of high and low quality appliances will be the same as with perfect information.
  C) fraction of high quality appliances will be less than with perfect information.
  D) none of the above

Question 2

If current output is less than the profit-maximizing output, then the next unit produced
 
  A) will decrease profit.
  B) will increase cost more than it increases revenue.
  C) will increase revenue more than it increases cost.
  D) will increase revenue without increasing cost.
  E) may or may not increase profit.

[scikid]

Answer to Question 1

C

Answer to Question 2

C