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:

Bank Service Charges

Fees charged by a bank for the maintenance of an account and for providing various banking services.

NSF Checks

Non-sufficient funds checks are ones that cannot be processed because the drawer's account does not have enough money to cover the amount.

Journal Entry

A record in accounting that represents a transaction and its effects on accounts, following the double-entry system.

Days' Cash on Hand

A financial metric indicating the number of days a company can continue to operate using only its available cash, without additional income.