There Are Two Types of Used Cars, High Quality and Low

question 21

Multiple Choice

There are two types of used cars, high quality and low quality.Buyers cannot distinguish the two types until after they have purchased them.Owners of high-quality cars will sell them if the price is $2,000 or higher.Owners of low-quality cars will sell them if the price is $1,000 or higher.Buyers value a high-quality used car at $1,942 and a low-quality used car at $1,200.Suppose that 70% of used cars are of high quality and 30% of used cars are of low quality.In equilibrium,

• A)only low-quality used cars will be sold.
• B)only high-quality used cars will be sold.
• C)no used cars will be sold.
• D)all used cars will be sold.
• E)high-quality used cars will sell for a uniformly higher price than low-quality used cars.

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Definitions:

Schizophrenia

A long-term mental disorder involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality into fantasy and delusion, and a sense of mental fragmentation.

Voice Hallucinations

Auditory hallucinations where an individual hears voices that are not present or generated by an external source.

Thalamus

A structure in the brain that acts as a relay station, transmitting information from the sensory organs to the cerebral cortex.

Auditory Cortex

The region of the brain that is responsible for processing auditory information, located in the temporal lobe.