In Rustbucket, Michigan, There Are 200 Used Cars for Sale

question 9

Multiple Choice

In Rustbucket, Michigan, there are 200 used cars for sale, half of them are good and half of them are lemons.Owners of lemons are willing to sell them for $100.Owners of good used cars are willing to sell them for prices above $1,100 but will keep them if the price is lower than $1,100.There is a large number of potential buyers who are willing to pay $200 for a lemon and $2,100 for a good car.Buyers can't tell good cars from bad, but original owners know.

• A)There will be an equilibrium in which lemons sell for $100 and good used cars sell for $1,100.
• B)There will be an equilibrium in which all used cars sell for $600.
• C)The only equilibrium is one in which all used cars on the market are lemons and they sell for $200.
• D)There will be an equilibrium in which all used cars sell for $1,150.
• E)There will be an equilibrium in which lemons sell for $200 and good used cars sell for $2,100.

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Definitions:

Consumer Protection Act

A legal provision designed to protect the rights of consumers from unfair trade practices, defective goods, and misleading advertisements.

Treble Damages

A legal provision allowing a court to triple the amount of damages to be awarded, typically used as a punishment in certain lawsuits.

Antitrust Violations

Actions conducted by businesses that result in unfair competition, mainly through practices that aim to establish or maintain monopolies or stifle competition.

Criminal Charges

Legal allegations made by the government claiming an individual or entity has committed a crime.