Question

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 Supply for bad cars is: Q 75 if P 2 $100 =0 otherwise Q Determine the full information symmetric equilibrium price in the market for bad cars. QUESTION 4 10 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 $300 Q 0, otherwise Demand for bad cars is: Q 50 if P $120 = 0, otherwise Q Supply for good cars is: Q 75 if P2 $150 Q 0 otherwise Supply for bad cars is: Q 75 if P 2 $100 Q 0 otherwise Determine the full information symmetric equilibrium quantity in the market for bad cars.

Answer 1

3.

In the market for bad cars the buyers wants to pay as much as $120 and less. The sellers wants to receive $100 for their bad cars. Then the full information price of bad cars in the market will be between $120 and $100. As buyer's price is less than that of the seller price the price will be settled at $120.

4.

​​​​​​At the market for used car the full information price of the bad cars is $120. At this price the amount of car demanded is 50.Then the full information quantity of bad cars in the market for bad cars is 50.