Suppose That in New Crankshaft, Pennsylvania, the Quality Distribution of the 4,000

question 20

Multiple Choice

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 4,000 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) $2,000.
• B) $100.
• C) $300.
• D) $200.
• E) $400.

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Definitions:

Value Judgments

Assessments based on personal views, ethics, or standards rather than objective measures, often influencing decision-making processes.

Policy Issues

Topics or problems that require governmental or organizational decision-making and action for resolution.

Normative Economic Statement

Statements that reflect opinions, beliefs, or values about what the economy should be like, rather than what it actually is.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.