Suppose There Are Only Two Kind of Cars in the Market

question 118

Multiple Choice

Suppose there are only two kind of cars in the market for used cars: lemons and good cars. A lemon is worth $1,000 both to its current owner and to anyone who buys it. A good car is worth $8,000 to its current and potential owners. Buyers can't tell whether a car is a lemon until after they have bought the car, and there is no warranty. What is the prevailing price of a used car?

• A) $8,000
• B) $1,000
• C) $4,500
• D) The prevailing price depends on how many lemons and how many good cars are traded.

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Definitions:

Free Radical

Highly reactive atoms or molecules that contain unpaired electrons and can participate in chain reactions.

Chlorination

The addition of chlorine to water or organic compounds, either as a disinfectant or to introduce chlorine atoms into molecules during chemical synthesis.

Methane

A colorless, odorless gas, the simplest alkane and the main component of natural gas; used as a fuel and in organic synthesis.

Termination Reaction

The chemical reaction that concludes a chain reaction process by reacting two or more reactive intermediates to form a stable product.