The lemons problem gives the owners of above-average-quality used cars an incentive to: A. offer a...
The lemons problem gives the owners of above-average-quality used cars an incentive to:
A. offer a warranty when selling their cars.
B. ask for a sales price that is higher than the blue book value of their car.
C. exaggerate the quality of their cars when selling them.
D. understate the true quality of their cars when selling them
Homework Answers
Answer
Option A
A. offer a warranty when selling their cars.
The quality is higher so buyer needs a signal to high quality and that is given by the warranty so the firm should give a warranty to signal the buyer.
Add Answer to:
The lemons problem gives the owners of above-average-quality
used cars an incentive to:
A. offer a...
1. Suppose there are two kinds of used cars, good cars and lemons. A good car...
1. Suppose there are two kinds of used cars, good cars and lemons. A good car is worth $10,000, and a lemon is worth $2,000. Owners of used cars know where the car is good or bad, but potential buyers do not. (a) Supposing half of all cars are good and half are lemons, what is the expected value of a used car of unknown quality? (b) Based on your answer to part (a), do you expect owners of used...
When used-car dealers signal the quality of a used car with a warranty, _______. A. it...
When used-car dealers signal the quality of a used car with a warranty, _______. A. it is not rational to believe the signal because some used-car dealers are crooked B. the price of a lemon rises above the price of a good used car because warranty costs on lemons are greater than warranty costs on good used cars C. the demand for lemons is eliminated D. buyers believe the signal because the cost of a false signal is high
What's the answer for both Qs There are many buyers who value high-quality used cars at...
What's the answer for both Qs
There are many buyers who value high-quality used cars at the full-information market price of p, and lemons at P2. There are a limited number of potential sellers who value high-quality cars at V1 spand lemons at V2 =p2. Everyone is risk neutral. The share of lemons among all the used cars that might potentially be sold is 0. Assume P4 > P2, V7 > V2. Further, suppose that the buyers incur a transaction...
Consider a used-car market with asymmetric information. The owners of used cars know what their vehicles...
Consider a used-car market with asymmetric information. The owners of used cars know what their vehicles are worth but have no way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they are being offered may be a low-quality "lemon." Instructions: Enter your answers as whole numbers. a. Suppose that there are equal numbers of good and bad used cars in the market and that good used cars are worth $13,000 while bad...
All of the following statements are true about marginal cost except I. marginal cost increases as...
All of the following statements are true about marginal cost except I. marginal cost increases as production expands. II. when marginal cost is below average cost, average cost is falling. III. when marginal cost is above average cost, average cost is constant. IV. when marginal cost meets the average total cost, the average total cost is at its minimum point. II and III I only II only III only III and IV IV only Which of the following is an...
22. Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC) a...
22. Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC) and that the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price-taker would: a. immediately shut down and get out of the industry. b. continue to produce a quantity of output such that its marginal revenue equals marginal cost. c. shut down temporarily, in hopes...
Zipcar: “It’s Not About Cars—It’s About Urban Life” Imagine a world in which no one owns...
Zipcar: “It’s Not About Cars—It’s About Urban Life” Imagine a world in which no one owns a car. Cars would still exist, but rather than owning cars, people would just share them. Sounds crazy, right? But Scott Griffith, CEO of Zipcar, the world’s largest car-share company, paints a picture of just such an imaginary world. And he has nearly 800,000 passionate customers—or Zipsters, as they are called—who will back him up. Zipcar specializes in renting out cars by the hour...
12. A market is said to be in equilibrium when: A Quantity demanded equals quantity supplied...
12. A market is said to be in equilibrium when: A Quantity demanded equals quantity supplied B. Production costs equal revenues from sale of the output C. The number of sellers equals the number of buyers D. People's needs are fully met 13. At the equilibrium prices: A. There are shortages but no surpluses B. There are surpluses but no shortages C. The economic problem of scarcity is no longer relevant D. There are no shortages or surpluses 14. An...
Utilizing Menu Engineering Concept in a Restaurant Operation The purpose of this assignment is fo...
Utilizing Menu Engineering Concept in a Restaurant Operation The purpose of this assignment is four fold: Step 1. To learn basic menu engineering principles Step 2. To learn menu engineering strategies Step 3. To use a spreadsheet program in generating two menu engineering reports Step 4. To evaluate the information found in the menu engineering reports using the menu engineering strategy model presented in this assignment. This will be accomplished by answering 9 questions found at the end of this...
1l. If a monopolistically competitive firm is incurring losses, then at the profit-max a price is above the average total cost curve. b. price is below the average total cost curve c. price is equal...
1l. If a monopolistically competitive firm is incurring losses, then at the profit-max a price is above the average total cost curve. b. price is below the average total cost curve c. price is equal to marginal revenue. d. price is less than marginal revenue. e. average total cost equals marginal cost. Both competitive and monopolistically competitive firms a. can maximize profit by raising price. b. cannot control or set their own price c. can maximize profit by producing to...
What's the answer for both Qs
There are many buyers who value high-quality used cars at the full-information market price of p, and lemons at P2. There are a limited number of potential sellers who value high-quality cars at V1 spand lemons at V2 =p2. Everyone is risk neutral. The share of lemons among all the used cars that might potentially be sold is 0. Assume P4 > P2, V7 > V2. Further, suppose that the buyers incur a transaction...
Consider a used-car market with asymmetric information. The owners of used cars know what their vehicles are worth but have no way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they are being offered may be a low-quality "lemon." Instructions: Enter your answers as whole numbers. a. Suppose that there are equal numbers of good and bad used cars in the market and that good used cars are worth $13,000 while bad...
12. A market is said to be in equilibrium when: A Quantity demanded equals quantity supplied B. Production costs equal revenues from sale of the output C. The number of sellers equals the number of buyers D. People's needs are fully met 13. At the equilibrium prices: A. There are shortages but no surpluses B. There are surpluses but no shortages C. The economic problem of scarcity is no longer relevant D. There are no shortages or surpluses 14. An...
Utilizing Menu Engineering Concept in a Restaurant Operation The purpose of this assignment is four fold: Step 1. To learn basic menu engineering principles Step 2. To learn menu engineering strategies Step 3. To use a spreadsheet program in generating two menu engineering reports Step 4. To evaluate the information found in the menu engineering reports using the menu engineering strategy model presented in this assignment. This will be accomplished by answering 9 questions found at the end of this...
1l. If a monopolistically competitive firm is incurring losses, then at the profit-max a price is above the average total cost curve. b. price is below the average total cost curve c. price is equal to marginal revenue. d. price is less than marginal revenue. e. average total cost equals marginal cost. Both competitive and monopolistically competitive firms a. can maximize profit by raising price. b. cannot control or set their own price c. can maximize profit by producing to...
Most questions answered within 3 hours.
-
How fast must a centrifuge spin if a particle 8 cm from the axis
of rotation...
asked 52 seconds ago -
Which of the following is characteristic of a single exposure
common vehicle outbreak?
a. Wide range...
asked 3 minutes ago -
You are a member of an alpine rescue team and must get a box of
supplies,...
asked 5 minutes ago -
Where the conservation of biodiversity is concerned, can I be
assisted with these questions:
1. What...
asked 6 minutes ago -
A 79-Ω loudspeaker, a 8.0-Ω loudspeaker, and a 3.7-Ω loudspeaker
are connected in parallel across the...
asked 37 minutes ago -
If X has a normal distribution with mean µ =
12 and variance σ2 = 9,...
asked 45 minutes ago -
An example of an operational taxonomic unit
(OTU) is
a. Multiple sequence alignment.
b. Protein sequence....
asked 47 minutes ago -
Electrons flow through a 2.7-mm-diameter aluminum wire at
2.5×10−4 m/s .
How many electrons move through...
asked 47 minutes ago -
For a recent year, McDonald’s (MCD)
company-owned restaurants had the following sales and expenses (in
millions):...
asked 46 minutes ago -
In a sample of 15 men, the mean height was 171 cm. In a sample
of...
asked 47 minutes ago -
In this exercise, we will be refactoring a working program. Code
refactoring is a process to...
asked 2 hours ago -
3
researchers at Cambrige looked at 5,000 firms in Englans and found
that, in terms of...
asked 2 hours ago