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

question 1

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 pay $200 for a lemon and $2,300 for a good car.Buyers can't tell good cars from bad, but original owners know.

• A)There will be an equilibrium in which all used cars sell for $1,250.
• B)There will be an equilibrium in which all used cars sell for $700.
• 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 lemons sell for $100 and good used cars sell for $1,300.
• E)There will be an equilibrium in which lemons sell for $200 and good used cars sell for $2,300.

---

Definitions:

Demand

The amount of a good or service that buyers are ready and capable of buying at different price levels over a given time frame.

Human Capital

The expertise, know-how, and practical experiences that a person or collective maintains, regarded in relation to their financial or worth importance to a business or country.

Nonhuman Capital

Resources or assets that are not human, such as machinery, buildings, and land, used in the production of goods and services.

Knowledge

information, understanding, or skills obtained through experience or education; the theoretical or practical understanding of a subject.