Consumers Value High-Quality Dirt Bikes at $6,000 and Low-Quality Dirt

question 32

Multiple Choice

Consumers value high-quality dirt bikes at $6,000 and low-quality dirt bikes at $2,500. The supply of used high-quality dirt bikes is Q_H = 0.5P_H - 2,000; the supply of used low-quality dirt bikes is Q_L = P_L - 1,000. Potential buyers cannot distinguish between the two. If buyers believe that half the used dirt bikes are high quality, what price are buyers willing to pay for a used dirt bike?

• A) $3,500
• B) $1,250
• C) $3,000
• D) $4,250

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