In the Used Car Market with No Warranties,the Equilibrium Is

question 62

Multiple Choice

In the used car market with no warranties,the equilibrium is a ________ and there is ________.

• A) pooling equilibrium; inefficiency, partly because of oversupply of good cars
• B) pooling equilibrium; inefficiency, partly because of oversupply of lemons
• C) separating equilibrium; no inefficiency
• D) separating equilibrium; inefficiency, partly because of oversupply of lemons
• E) pooling equilibrium; no inefficiency

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Definitions:

Selling Price

The sum of money that a purchaser spends to acquire a good or service.

Absorption Costing

A strategy for calculating product costs that includes every aspect of manufacturing expenses: direct materials, direct labor, and all overhead costs, both variable and fixed.

Markup

The amount added to the cost of goods to cover overhead and profit; a percentage of cost.

Direct Labor

Labor costs directly associated with the manufacture of specific goods or the delivery of specific services, representing wage expenses for personnel involved in production.