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

question 20

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.
Suppose some of the owners with solid foundations remove their homes from the market because they can't sell for a price that is as high as the value of their homes.Then

• A)the buyers' reservation price rises.
• B)the owners of cracked slabs also begin to remove their homes from the market.
• C)the proportion of homes for sale with a cracked slab rises.
• D)the buyers become more willing to believe the owners' claim of a solid foundation.

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Definitions:

Residual Volume

Residual Volume is the amount of air remaining in the lungs after a maximal exhalation, ensuring that gas exchange can continue even between breaths.

Inspiratory Reserve Volume

The volume of air in addition to the tidal volume that can be inhaled at maximum effort.

Functional Residual Capacity

The volume of air remaining in the lungs after a normal, passive exhalation, important for respiratory function analysis.

Vital Capacity

The highest quantity of air one can release from their lungs following a maximal intake of air.