Suppose There Is a Used Car Market with 1,000 Cars

question 86

Multiple Choice

Suppose there is a used car market with 1,000 cars for sale. Buyers know that 500 of the used cars are of poor quality and are worth only $500, while the other 500 used cars are of good quality and are worth $1,500. However, buyers do not know which individual cars are of poor quality or good quality. The seller of a car knows the worth of the car. In equilibrium, what is the average worth of cars sold in this market?

• A)$1,250
• B)$1,000
• C)$500
• D)$1,500

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