Consider a Hypothetical Used Car Market in Which Fifty Percent

question 38

Multiple Choice

Consider a hypothetical used car market in which fifty percent of the cars for sale are low-quality cars and fifty percent of the cars for sale are high-quality cars. Buyers know that half of the cars are high quality and half are low quality, but they do not know which individual cars are high quality and low quality. Sellers know whether their cars are high quality or low quality. Buyers would be willing to pay at most $2,000 for a low-quality car and at most $8,000 for a high-quality car. Sellers of low-quality cars have a willingness to sell of $1,500. Sellers of high-quality cars have a willingness to sell of $7,000.Which of the following statements is true?

• A)This market will become saturated with low-quality cars.
• B)Buyers will offer a price of $5,000 in equilibrium.
• C)Both the buyers and the sellers have incomplete information.
• D)All of these statements are true.

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Definitions:

Content Morpheme

refers to a morpheme that carries semantic content, as opposed to a grammatical function, such as nouns, verbs, adjectives, and adverbs.

Function Morpheme

A type of morpheme that provides grammatical relationships between words in a sentence.

Pseudo Morpheme

A unit of sound or a part of a word that appears to have meaning or function as a morpheme but does not qualify as one in the language structure.

Morphemes

The smallest units of meaning in a language, which can be a single word, prefix, or suffix.