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Author Question: You are in the market for a used 2013 Toyota Corolla. You know that half of the 2013 Corollas are ... (Read 32 times)

WhattoUnderstand

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on: Apr 19, 2019

Question 1

Adverse selection and moral hazard arise because of


◦ asymmetric information.
◦ selection problems.
◦ risk aversion.
◦ mechanism designs for dealing with informational problems.

Question 2

You are in the market for a used 2013 Toyota Corolla. You know that half of the 2013 Corollas are lemons and half are peaches. If you could be assured that the Corolla you were buying was a peach, you would be willing to pay up to $12,000. On the other hand, you would only be willing to pay $4,000 for a lemon. You have no ability to discern whether any particular Corolla is a lemon or a peach. Sellers of Corollas, on the other hand, are likely to know whether their particular car is a lemon or a peach. Suppose sellers of lemons will sell their cars for $3,000 or more and peach sellers will be willing to sell their cars for $9,000 or more. If you are risk neutral, you are willing to offer ________ and ________ are willing to sell you their car.


◦ $4,000 for a car of unknown quality; lemon owners only
◦ $6,000 for a car of unknown quality; lemon owners only
◦ $8,000 for a car of unknown quality; lemon owners only
◦ $9,000 for a car of unknown quality; both lemon and peach owners
Principles of Economics ¦ Case, Fair, Oster ¦ 12th Edition
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Marked as best answer by WhattoUnderstand on Apr 19, 2019

EAN94

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Reply #1 on: Apr 19, 2019
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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WhattoUnderstand

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Reply #2 on: Apr 19, 2019
Thanks


EAN94

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Reply #3 on: Apr 19, 2019
Welcome :)


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