Suppose That Buyers Assume That There Is a 30% Chance

question 233

Essay

Suppose that buyers assume that there is a 30% chance of getting a plum, and 8 of 10 cars in the used car market are lemons. Is this an equilibrium?

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Definitions:

Note Receivable

A written promise for the payment of a specified amount of money at a set time to the holder or bearer of the note.

Accounts Receivable

Represents money owed to a business by its customers for goods or services delivered but not yet paid for, considered a current asset on the balance sheet.

Notes Payable

A liability account that represents amounts owed on written promises to pay a specific sum of money at a future date.

Formal Promise

An official commitment or assurance, often in writing, to perform a specified action or uphold a certain condition.