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:

Issued Discount

A reduction from the nominal or face value of a security at the time it is issued.

Amortization

Amortization is the process of spreading out a loan into a series of fixed payments over time, or gradually writting off the initial cost of an intangible asset.

Discount on Bonds Payable

The difference when bonds are issued for less than their face value, representing an extra cost of borrowing to the issuer.

Straight-Line Method

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.