In the Used Car Market with No Warranties,the Equilibrium Is

question 62

Multiple Choice

In the used car market with no warranties,the equilibrium is a ________ and there is ________.

• A) pooling equilibrium; inefficiency, partly because of oversupply of good cars
• B) pooling equilibrium; inefficiency, partly because of oversupply of lemons
• C) separating equilibrium; no inefficiency
• D) separating equilibrium; inefficiency, partly because of oversupply of lemons
• E) pooling equilibrium; no inefficiency

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Definitions:

Affordability

A measure of an individual's financial ability to meet the cost of living or purchase goods and services.

Real Interest Rate

The rate of interest an investor expects to receive after allowing for inflation, reflecting the true cost of borrowing or the true yield on an investment.

Desired Investment

The level of investment that businesses plan to undertake, based on their expectations of future profitability.

Net Capital Outflow

The difference between the domestic country's investment abroad and foreign investments within the country.