6. Consumers know that some fraction of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Assume that cars do not depreciate in value with use. Suppose consumers are risk-neutral and value non- defective cars at $10,000 each and defective cars at $6,000 each. e. If consumers are willing to pay $8,000 for a new car, what percentage of new cars are defective? f. If you saw a used car for sale with a price tag of $6,500, would you purchase this car? g. How many used cars for sale in this market will be

6. Consumers know that some fraction of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Assume that cars do not depreciate in value with use. Suppose consumers are risk-neutral and value non- defective cars at $10,000 each and defective cars at $6,000 each. e. If consumers are willing to pay $8,000 for a new car, what percentage of new cars are defective? f. If you saw a used car for sale with a price tag of $6,500, would you purchase this car? g. How many used cars for sale in this market will be

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 14CTQ: The rules of politics are not always the same as the rules of economics. In discussions of setting...

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