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

question 22

Multiple Choice

In Rustbucket, Michigan, there are 200 used cars for sale; half of these cars are good and half of them are lemons.Owners of lemons are willing to sell them for $500.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 $600 for a lemon and $1,700 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 $800.
• B)There will be an equilibrium in which lemons sell for $500 and good used cars sell for $1,100.
• C)There will be an equilibrium in which all used cars sell for $1,150.
• D)The only equilibrium is one in which all used cars on the market are lemons and they sell for $600.
• E)There will be an equilibrium in which lemons sell for $600 and good used cars sell for $1,700.

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