Suppose Joe Has a Two-Year Old Honda Civic That's in Excellent

question 56

Multiple Choice

Suppose Joe has a two-year old Honda Civic that's in excellent condition and that he would be willing to sell for $13,000. Lauren, who is risk-neutral, is considering whether to buy Joe's car. She's willing to pay $14,000 for a two-year Honda Civic that's in excellent condition and only $10,000 for one that's not in excellent condition. Lauren cannot tell whether Joe's car is in excellent condition. She believes that only 20 percent of two-year old Hondas for sale in the market are in excellent condition and that the other 80 percent are not in excellent condition. Will Lauren buy Joe's car?

• A)Yes, because Lauren is willing to pay $14,000 for a car that's in excellent condition.
• B)No, because Lauren will not be willing to pay Joe $13,000.
• C)Maybe, because Lauren might be willing to pay as much as $14,000.
• D)Yes, because Lauren will be willing to pay Joe more than $13,000.

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Definitions:

Trichromatic Mixing

The theory that the human eye perceives color through the relative contributions of three primary colors: red, green, and blue.

Additive Colour Mixing

A process of combining different colors of light, where mixing various lights (red, green, blue) can produce a spectrum of colors including white.

Ventral Stream

A pathway in the brain involved in processing visual information related to object recognition and form.

Dorsal Stream

A pathway in the brain that processes spatial awareness and the relationship of objects in the surroundings, often referred to as the "where" pathway.