You Are in the Market for a Used 2006 Honda

question 15

Multiple Choice

You are in the market for a used 2006 Honda Accord. You know that half of the 2006 Accords are lemons and half are peaches. If you could be assured that the Accord you were buying was a peach, you would be willing to pay up to $10,000. On the other hand, you would only be willing to pay $2,000 for a lemon. You have no ability to discern whether any particular Accord is a lemon or a peach. Sellers of Accords, on the other hand, are likely to know whether their particular car is a lemon or a peach. Suppose sellers of lemons will sell their cars for $1,500 or more and peach sellers will be willing to sell their cars for $8,500 or more. You are willing to offer ________ for a car of unknown quality and ________ are willing to sell you their car.

• A) $2,000; lemon owners only
• B) $5,000; lemon owners only
• C) $6,000; lemon owners only
• D) $8,500; both lemon and peach owners

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Definitions:

Credit Card Bill

A statement listing transactions, payments, and outstanding charges on a credit card account.

Penalty

A punishment imposed for breaking a law, rule, or contract.

Budget

A budget is a financial plan that outlines expected income and expenses over a specified period, helping to manage resources effectively.

Cut Expenses

The act of reducing spending or costs in order to save money or meet a budget.