Two Types of Existing Houses Are for Sale: Ones with a Cracked

question 57

Multiple Choice

Two types of existing houses are for sale: ones with a cracked foundation and ones without.In all other respects,they are identical.Houses without cracked foundations are worth $200,000 while those with cracked foundations are worth $200,000 minus the $20,000 to fix the crack or $180,000.The frequency of solid foundations is 80%.Sellers know which type of house they have but buyers cannot detect a crack.No seller "must" sell his house in order to move and thus no one accepts anything less than its value.
How can owners of a solid foundation home signal high quality credibly?

• A)Keep it on the market indefinitely at $200,000 because eventually buyers will catch on.
• B)Advertise in the national TV stating the quality of the house.
• C)Lower their price to $196,000.
• D)Offer a warranty to fix any slab problems that develop in the next 12 months.

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Definitions:

African Slaving Posts

Refers to locations along the African coast established by European traders from the 15th century for the capture and sale of African people into the transatlantic slave trade.

Axim

A coastal town in Ghana known for its historical significance in the context of European colonialism and the Atlantic slave trade.

Black Slaves

Individuals of African descent who were forcibly taken or born into slavery, primarily used for labor and services without freedom or rights.

Jamestown

The first permanent English settlement in North America, founded in Virginia in 1607.