Two Types of Existing Houses Are for Sale: Ones with a Cracked

question 73

Multiple Choice

Two types of existing houses are for sale: ones with a cracked foundation and ones without.In all other respects,they are identical.Houses without cracked foundations are worth $200,000;those with cracked foundations are worth $200,000 minus the $20,000 to fix the crack,or $180,000.The frequency of solid foundations is 80%.Sellers know which type of house they have,but buyers cannot detect a crack.No seller must sell his house in order to move,and thus no one accepts anything less than the value of their house.
-Refer to the information above.The long-run equilibrium in the housing market is

• A) 80% homes with solid foundations,20% cracked foundations,and a reservation price of $180,000.
• B) 100% cracked foundation homes and a reservation price of $180,000.
• C) 100% solid foundation homes and a reservation price of $200,000.
• D) 100% cracked foundation homes and a reservation price between $200,000 and $180,000.
• E) indeterminate.

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Definitions:

Judgment N.o.v.

Short for "judgment non obstante veredicto," a court ruling overturning a jury's verdict because it was not reasonably supported by evidence.

Notice of Appeal

A formal document filed by a party desiring to appeal a court's decision to a higher court.

Unpaid Rent

Money owed by a tenant to their landlord for the occupancy of rental property and not paid by the due date.

Wrongful Interference

An illegal action that intentionally disrupts a contractual or business relationship causing damage.