You Are in the Market for a Used 2013 Honda

question 21

Multiple Choice

You are in the market for a used 2013 Honda Accord. You know that half of the 2013 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. Over time the price in the market for 2013 Accords will ________ and ________ will be traded.

• A) be between $8,500 and $10,000 for peaches and between $1,500 and $2,000 for lemons; both lemons and peaches
• B) be between $8,500 and $10,000; only peaches
• C) be between $1,500 and $2,000 for lemons; only lemons
• D) be between $1,500 and $10,000; both lemons and peaches

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Definitions:

Tariffs

Taxes imposed on imported goods, often used to protect domestic industries or generate revenue.

Imported Goods

Products brought into one country from another for the purpose of sale or trade.

Trade Imbalance

Trade imbalance occurs when there is a significant difference between a country's imports and exports, affecting its economic health.

Financial Crises

are situations where the value of financial institutions or assets drops significantly, leading to a collapse in the economy and causing widespread economic disruption.