Assume That Both High and Low Quality Appliances Are Sold

question 117

Multiple Choice

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?

• A) The fraction of high quality appliances will be greater than under perfect knowledge.
• B) The fractions of high and low quality appliances will be the same as with perfect information.
• C) The fraction of high quality appliances will be less than with perfect information.
• D) none of the above

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Definitions:

Low Incomes

Economic situation where individuals or families earn significantly less than the average income level within a society.

Higher Incomes

Earnings that are above the average or median level, often associated with increased financial stability and purchasing power.

Dissociation

A psychological process involving a disconnection between thoughts, identity, consciousness, and memory, often as a defense mechanism to stress or trauma.

Posttraumatic Stress Disorder

A mental health condition that can develop in individuals who have gone through or seen a distressing event, marked by recurring memories, bad dreams, and intense worry.