Homework Answers
Ans) Asymmetric information is when one party has more information than the other. A classic example of this is, market for used cars. In a market for used cars, seller of the car has more information than the buyer. Now in this market, there will be two kinds of seller. One who is selling lemons (defected product) and one who is selling cherry (better quality product). But the buyer cannot know who is selling what due to asymmetric information. As a result, price offered by the buyer will be very less, at which, seller who is selling lemons will be ready to sell the product and the seller selling cherry may not sell the product. Consequently, in this market, there will be more lemons and less cherries.
Option b.
Add Answer to:
Question 4 (1 point) In a used car market the asymmetry of information tends to benefit...
Suppose there are 100 sellers, each offering one used car, and 200 buyers, each wanting one...
Suppose there are 100 sellers, each offering one used car, and 200 buyers, each wanting one used car. A used car could be of high or low quality. There are 50 high-quality cars and 50 low-quality cars. A high-quality used car is worth $10,000 to the buyer whereas a low-quality used car is worth $2,0000 to the buyer. A seller knows the car’s quality. (a) Suppose a buyer can observe the car’s quality. What is the buyer’s maximum willingness to...
can someone explain how to work out part b *edit*: better picture 1. Consider the market for used cars shown in the figure below. The left panel (a) shows the market for low-quality cars (lemo...
can someone explain how to work out part b
*edit*: better picture
1. Consider the market for used cars shown in the figure below. The left panel (a) shows the market for low-quality cars (lemons); the right panel (b) shows the market for high-quality cars (plums). If all buyers and sellers had full information about the quality of automobiles being offered for sale, lemons would sell for $8,000 and plums would sell for $16,000. Price,() (S/car) (a) Lemons (b) Plums...
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...
Drop down options only low-quality sellers no sellers all types of sellers only high quality sellers...
Drop down options
only low-quality sellers
no sellers
all types of sellers
only high quality sellers
Consider a market in which there are many potential buyers and sellers of used cars. Each potential seller has one car, which is either of high quality (a plum) or low quality (a lemon). A seller with a low-quality car is willing to sell it for $3,500, whereas a seller with a high-quality car is willing to SALE sell it for $9,000. A buyer...
Suppose there are 50 sellers of cars in a used car market who know the quality...
Suppose there are 50 sellers of cars in a used car market who know the quality of their car. Of these 50 sellers, 25 own plums. Each owner of a plum is willing to sell her car as long as she receives at least $4000 for it. The remaining sellers own lemons, which each would be willing to sell for at least $2000. There are also 50 potential buyers. a) Suppose that each buyer is willing to pay up to...
Please help B. Asymmetric Information & Behavioral Economics 1. What is the equilibrium price and quantity in the u...
Please help
B. Asymmetric Information & Behavioral Economics 1. What is the equilibrium price and quantity in the used car market below? Why aren't the other 2 points labeled considered equilibrium points? Supply of high-quality cars (plums) Supply of low-quality cars (lemons) Price (S) WTP with 50/60 expectations $10,000 WTP with pessimistic expectations $4,000 40 70 30 Number of used cars sold per day
B. Asymmetric Information & Behavioral Economics 1. What is the equilibrium price and quantity in the...
Consider the market for used cars. The overall population of used cars is a fraction p...
Consider the market for used cars. The overall population of used cars is a fraction p plums and a fraction 1 ? p lemons. Used car sellers value plums at $2,000 and lemons at $1,000. Used car buyers value plums at $2,400 and lemons at $1,200. There is asymmetric information. The seller of a car knows the type of the car and the potential buyer does not. Market equilibrium is defined as a Nash equilibrium. a) Suppose p = 0.5....
Please help with these two questions QUESTION 5 Assume that there is a market for used cars where there are only two t...
Please help with these two questions
QUESTION 5 Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers Demand for good cars is: Q = 50 if PS$200 Q 0, otherwise Demand for bad cars is: 50 if PS $80 Q = Q 0, otherwise Supply for good cars is: Q 75 if P2 $150 =0 otherwise Q Supply...
Please help with questions 3 and 4 QUESTION 3 Assume that there is a market for used cars where there are only two typ...
Please help with questions 3 and 4
QUESTION 3 Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers. Demand for good cars is: Q 50 if P S $300 = 0, otherwise Q Demand for bad cars is: Q 50 if P $120 Q 0, otherwise Supply for good cars is: Q 75 if P2$150 =0 otherwise Q...
Thanks! Murali sells used cell phones, and buyers find it difficult to assess the quality of...
Thanks!
Murali sells used cell phones, and buyers find it difficult to assess the quality of this product before buying. Which of the following statements is NOT consistent with the situation in Murali's market? None of the other answers are true Adverse selection of buyers will be present Customers will pay only a low price, even if the phone quality is high. The market will skew toward low quality. Murali may end up selling low-quality used cell phones. When buyers...
can someone explain how to work out part b
*edit*: better picture
1. Consider the market for used cars shown in the figure below. The left panel (a) shows the market for low-quality cars (lemons); the right panel (b) shows the market for high-quality cars (plums). If all buyers and sellers had full information about the quality of automobiles being offered for sale, lemons would sell for $8,000 and plums would sell for $16,000. Price,() (S/car) (a) Lemons (b) Plums...
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...
Drop down options
only low-quality sellers
no sellers
all types of sellers
only high quality sellers
Consider a market in which there are many potential buyers and sellers of used cars. Each potential seller has one car, which is either of high quality (a plum) or low quality (a lemon). A seller with a low-quality car is willing to sell it for $3,500, whereas a seller with a high-quality car is willing to SALE sell it for $9,000. A buyer...
Please help
B. Asymmetric Information & Behavioral Economics 1. What is the equilibrium price and quantity in the used car market below? Why aren't the other 2 points labeled considered equilibrium points? Supply of high-quality cars (plums) Supply of low-quality cars (lemons) Price (S) WTP with 50/60 expectations $10,000 WTP with pessimistic expectations $4,000 40 70 30 Number of used cars sold per day
B. Asymmetric Information & Behavioral Economics 1. What is the equilibrium price and quantity in the...
Please help with these two questions
QUESTION 5 Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers Demand for good cars is: Q = 50 if PS$200 Q 0, otherwise Demand for bad cars is: 50 if PS $80 Q = Q 0, otherwise Supply for good cars is: Q 75 if P2 $150 =0 otherwise Q Supply...
Please help with questions 3 and 4
QUESTION 3 Assume that there is a market for used cars where there are only two types of cars: good cars and bad cars. Below is the full information for consumers and sellers. Demand for good cars is: Q 50 if P S $300 = 0, otherwise Q Demand for bad cars is: Q 50 if P $120 Q 0, otherwise Supply for good cars is: Q 75 if P2$150 =0 otherwise Q...
Thanks!
Murali sells used cell phones, and buyers find it difficult to assess the quality of this product before buying. Which of the following statements is NOT consistent with the situation in Murali's market? None of the other answers are true Adverse selection of buyers will be present Customers will pay only a low price, even if the phone quality is high. The market will skew toward low quality. Murali may end up selling low-quality used cell phones. When buyers...
Most questions answered within 3 hours.
-
How does temperature affect ADH during enzyme
kinetics?
asked 3 minutes ago -
A $1000 par value convertible bond has a conversion price of
$25. It is currently selling...
asked 12 minutes ago -
Write a java program that declares 10 element array (of type
integers), creates and initializes the...
asked 9 minutes ago -
import java.util.Arrays;
import java.util.Random;
import java.util.Scanner;
/**
* TODO Write a summary of the role of...
asked 14 minutes ago -
Sodium hydroxide is a strong base and ammonium hydroxide is a
weak base. Which of the...
asked 20 minutes ago -
Glycerol, C3H8O3, is a substance used extensively in the
manufacture of cosmetics, foodstuffs, antifreeze, and plastics....
asked 23 minutes ago -
After moving through Chapter 1 of our textbook, what is a social
issue/area of concern that...
asked 23 minutes ago -
Please complete the implementation of the four functions IN
C.
//************************************************************************************/
//
// countNumberofOnes
//
//...
asked 44 minutes ago -
A memory test consists of 35 tasks. Each task is graded on a
scale of 1...
asked 24 minutes ago -
Construction Cost Analysis and Estimating:
A project requires 17,000 allowed hours. Location of the work is...
asked 33 minutes ago -
1: In 802.11b, Access Point (AP) delivers a nonce to the Station
(STA). This nonce is...
asked 33 minutes ago -
calculate change in entropy and change in enthalpy for freezing
1 mol of water at -10C...
asked 40 minutes ago