Suppose That in New Crankshaft, Pennsylvania, the Quality Distribution of the 8,000

question 11

Multiple Choice

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 8,000 used cars on the market is such that the number of used cars of value less than V is . Original owners must sell their used cars. Original owners know what their cars are worth, but buyers can't determine a car's quality until they buy it. An owner can either take his car to an appraiser and pay the appraiser $100 to appraise the car (accurately and credibly) or sell the car unappraised. In equilibrium, car owners will have their cars appraised if and only if the car's value is at least

• A) $100.
• B) $4,000.
• C) $300.
• D) $200.
• E) $400.

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Definitions:

Optimal Solution

The most efficient, effective, or desirable solution to a problem or the best decision given the constraints.

Total Cash

The overall amount of liquid assets available to an individual or organization.

Price/demand Elasticity

A measure of how much the demand for a product changes in response to a change in its price.

Continuous Values

Numerical data that can take any value within a specified range, often associated with measurements.