Deck 9: Imperfect Information, External Benefits, and External Costs

Question 1

If buyers believe that the percentage of high quality goods on the market is greater than the actual percentage of high quality goods on the market

A) buyers will be willing to pay a price that is higher than the price they would pay with perfect information.
B) the most that buyers will be willing to pay is less than the price they would pay with perfect information.
C) sellers of low quality goods will be driven from the market.
D) the market will be in a short run equilibrium.

Answer 1

buyers will be willing to pay a price that is higher than the price they would pay with perfect information.

Question 2

In equilibrium in a mixed market

A) the percent of low quality goods on the market equals the buyers' estimate of the percent of low quality goods on the market.
B) the percent of low quality goods on the market equals the sellers' estimate of the percent of low quality goods on the market.
C) 50% of the goods on the market are low quality and 50% are high quality.
D) all low quality goods have been driven out of the market.

Answer 2

the percent of low quality goods on the market equals the buyers' estimate of the percent of low quality goods on the market.

Question 3

Which of the following is the least likely example of asymmetric information?

A) King Solomon and two women who claim to be the mother of a baby
B) a job applicant and a prospective employer
C) an auto mechanic and a transient customer
D) a retailer of used books and prospective customers

Answer 3

a retailer of used books and prospective customers

Question 4

Table 9.1
Table 9.1 represents 3 markets for used computers. Which of the markets in Table 14.1 are in equilibrium?

A) 1 only
B) 2 only
C) 3 only
D) 2 and 3

Question 5

There exists asymmetric information in a market

A) if both sides of the market have the same information about the good.
B) only if buyers have better information about the good than sellers.
C) only if sellers have better information about the good than buyers.
D) if either buyers or sellers have better information than the other group.

Question 6

Table 9.1
Table 9.1 represents 3 markets for used computers. Which of the markets in Table 14.1 are NOT in equilibrium?

A) 1 only
B) 2 only
C) 3 only
D) 1 and 3

Question 7

If the seller knows more about the good than the buyer knows there exists

A) an externality.
B) asymmetric information.
C) moral hazard.
D) a public goods problem.

Question 8

Which one of the following is an example of asymmetric information?

A) A supermarket repackages packages of stale meat and sells them.
B) A homeowner knowingly sells a house that has hidden electrical problems.
C) A company hires an employee who has an addiction to sleeping pills.
D) all of the above

Question 9

Suppose buyers in the used car market are willing to pay $4,000 for a plum (high-quality) used car and $2,000 for a lemon (low-quality) used car. If buyers believe that 50% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?

A) $2000
B) $3000
C) $3500
D) $4000

Question 10

Asymmetric information exists in the market for used cars because

A) sellers have better information concerning the quality of used cars than buyers.
B) buyers have better information concerning the quality of used cars than sellers.
C) buyers and sellers have equal information concerning the quality of used cars.
D) it is impossible for buyers or sellers to determine the quality of used cars.

Question 11

Suppose buyers in the used car market are willing to pay $5,000 for a plum (high-quality) used car and $2,500 for a lemon (low-quality) used car. If buyers believe that 50% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?

A) $2500
B) $3000
C) $3750
D) $5000

Question 12

Suppose buyers in the used car market are willing to pay $6,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 75% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?

A) $4,250
B) $4,000
C) $3,750
D) $3,500

Question 13

Relative to a market with perfect information, in a market with imperfect information

A) some goods will be sold in small quantities or not at all.
B) more than the equilibrium quantity of goods will be sold.
C) the equilibrium quantity will be sold, but at a price higher than the equilibrium price.
D) the equilibrium quantity will be sold for the equilibrium price.

Question 14

If in the market for used bikes only sellers can distinguish between good quality and bad quality used bikes, then in that market there exists

A) perfect information.
B) asymmetric information.
C) public information.
D) duopoly information.

Question 15

A mixed market is one in which

A) consumers can be buyers and sellers and producers can be sellers and buyers.
B) there are different qualities of a good being sold in the market and there is imperfect information about the quality of each good.
C) a seller of a good requires that the purchase of one good be tied to the purchase of another.
D) demand is positively sloped and supply is negatively sloped.

Question 16

Suppose buyers in the used car market are willing to pay $8,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 20% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?

A) $7,000
B) $6,000
C) $5,000
D) $4,000

Question 17

In some markets for used goods

A) the seller has more information than the buyer about the quality of the good.
B) the buyer has more information than the seller about the quality of the good.
C) low-quality used goods will be underpriced.
D) the quality of used goods sold in the market will typically rise over time.

Question 18

Which of the following is the least likely example of asymmetric information?

A) an insurance company and a client who just obtained a driver license
B) a seller of used cars and a prospective customer
C) a seller of fresh fruit and a buyer
D) a retailer of music CDs and a buyer

Question 19

One assumption of the basic model of supply and demand is that

A) buyers and sellers have enough information to make informed choices.
B) buyers and sellers will benefit equally from a voluntary transaction.
C) sellers will always have more information than buyers.
D) buyers will always have more information than sellers.

Question 20

In markets with imperfect information

A) buyers and sellers will use resources to acquire information before making decisions.
B) buyers will use resources to acquire information before making a decision, but sellers do not need to acquire additional information before making a decision.
C) sellers will use resources to acquire information before making a decision, but buyers do not need to acquire additional information before making a decision.
D) neither buyers nor sellers will be able to acquire information in order to make decisions.

Question 21

Figure 9.2
Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. If buyers believe that 50% of the used cameras in the market are lemons (low quality), how much will pay for a used camera?

A) $25
B) $50
C) $75
D) $125

Question 22

Figure 9.3
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of the used refrigerators in the market are lemons (low quality), how much will they be willing to pay for a used refrigerator?

A) $100
B) $200
C) $250
D) $300

Question 23

Figure 9.1
Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers have pessimistic expectations about the used bikes in the market, how many used plums (high-quality used bikes) will be sold?

A) 0
B) 8
C) 12
D) 16

Question 24

Figure 9.2
Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. Initially buyers believe that 50% of used cameras in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer cameras are sold in equilibrium?

A) 10
B) 15
C) 20
D) 25

Question 25

Figure 9.1
Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of used bikes are lemons (low quality), how many lemons (low quality) will be supplied by sellers?

A) 8
B) 12
C) 16
D) 22

Question 26

Figure 9.1
Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers have pessimistic expectations about the used bikes in the market, what number of used bikes sold will actually be lemons (low quality)?

A) 8
B) 12
C) 16
D) 22

Question 27

Table 9.1
In Table 9.1, Market 1 would be in equilibrium if buyers believed lemons accounted for

A) 60% of the market.
B) 55% of the market.
C) 45% of the market.
D) 40% of the market.

Question 28

Figure 9.1
Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of used bikes are lemons (low quality), how many plums (high quality) will be supplied by sellers?

A) 8
B) 12
C) 16
D) 22

Question 29

Figure 9.3
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), how many plums (high quality) will be supplied by sellers?

A) 50
B) 125
C) 175
D) 250

Question 30

Figure 9.3
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), how many lemons (low quality) will be supplied by sellers?

A) 50
B) 125
C) 175
D) 250

Question 31

Figure 9.2
Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. If buyers believe that 50% of used cameras in the market are lemons (low quality), how many lemons (low quality) will be supplied by sellers?

A) 10
B) 15
C) 20
D) 25

Question 32

Figure 9.1
Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of used bikes in the market are lemons (low quality), what fraction of used bikes sold will actually be plums (high quality)?

A) 8/30
B) 22/30
C) 8/22
D) 30/30

Question 33

Figure 9.1
Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. Initially buyers believe that 50% of used bikes in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer bikes are sold in equilibrium?

A) 8
B) 12
C) 18
D) 22

Question 34

Figure 9.1
Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of used bikes in the market are lemons (low quality), what fraction of used bikes sold will actually be lemons (low quality)?

A) 8/30
B) 22/30
C) 8/22
D) 30/30

Question 35

Figure 9.1
Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of the used bikes are lemons (low quality), how much will they be willing to pay for a used bike?

A) $50
B) $80
C) $125
D) $200

Question 36

Figure 9.2
Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. If buyers believe that all of the used cameras in the market are lemons (low quality), what number of used cameras sold will actually be lemons (low quality)?

A) 10
B) 15
C) 20
D) 25

Question 37

Figure 9.2
Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. If buyers believe that 50% of used cameras in the market are lemons (low quality), how many plums (high quality) will be supplied by sellers?

A) 10
B) 15
C) 20
D) 25

Question 38

Table 9.1
Refer to Table 9.1. In which market do buyers underestimate the chance of getting a lemon?

A) 1 only
B) 2 only
C) 3 only
D) 1 and 3 only

Question 39

Figure 9.2
Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. If buyers believe that 50% of used cameras in the market are lemons (low quality), what fraction of used cameras sold will actually be plums (high quality)?

A) 10/25
B) 10/35
C) 25/35
D) None of the cameras sold will be plums.

Question 40

Figure 9.2
Figure 9.2 represents the market for used cameras. Suppose buyers are willing to pay $125 for a plum (high-quality) used camera and $25 for a lemon (low-quality) used camera. If buyers believe that 50% of used cameras in the market are lemons (low quality), what fraction of used cameras sold will actually be lemons (low quality)?

A) 10/25
B) 10/35
C) 25/35
D) All of the cameras sold will be lemons.

Question 41

Figure 9.3
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), what fraction of used refrigerators sold will actually be plums (high quality)?

A) 50/250
B) 50/300
C) 250/300
D) None of the refrigerators sold will be plums.

Question 42

Figure 9.5
Figure 9.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 80% of used cameras in the market are lemons (low quality), what is consumers' willingness to pay ($X)?

A) $5,000
B) $3,400
C) $3,000
D) $1,700

Question 43

Figure 9.5
Figure 9.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 80% of used cameras in the market are lemons (low quality), how many plums will be supplied in the market?

A) 30
B) 40
C) 70
D) 120

Question 44

Table 9.2
In Table 9.2, Market 3 would be in equilibrium if buyers believed plums account for

A) 30% of the market.
B) 40% of the market.
C) 50% of the market.
D) 60% of the market.

Question 45

Table 9.2
Table 9.2 represents 3 markets for used guitars. Which of the markets in Table 9.2 are NOT in equilibrium?

A) 1 only
B) 2 only
C) 3 only
D) 2 and 3

Question 46

Table 9.2
In Table 9.2, Market 2 would be in equilibrium if buyers believed lemons account for

A) 55% of the market.
B) 65% of the market.
C) 70% of the market.
D) 80% of the market.

Question 47

Figure 9.5
Figure 9.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. Initially buyers believe that 80% of used cameras in the market are lemons (low quality). Compared to the outcome with these initial expectations, how many fewer cars are sold in equilibrium?

A) 50
B) 80
C) 110
D) The number of cars sold in equilibrium is the same as the outcome with neutral expectations.

Question 48

Figure 9.4
Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. If buyers believe that 50% of used digital cameras in the market are lemons (low quality), how many plums (high quality) will be supplied by sellers?

A) 50
B) 60
C) 150
D) 200

Question 49

Figure 9.4
Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. If buyers believe that all of used digital cameras in the market are lemons (low quality), what number of used digital cameras sold will actually be lemons?

A) 50
B) 60
C) 110
D) 150

Question 50

Figure 9.3
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. Initially buyers believe that 50% of used refrigerators in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer refrigerators are sold in equilibrium?

A) 50
B) 125
C) 175
D) 250

Question 51

Figure 9.3
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that all of the used refrigerators in the market are lemons (low quality), what number of used refrigerators sold will actually be lemons (low quality)?

A) 50
B) 125
C) 175
D) 250

Question 52

Figure 9.3
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. Compared to the situation when buyers have neutral expectations, if buyers believed that fewer than 50% of used refrigerators are lemons (low-quality)

A) more plums (high-quality) used refrigerators would be on the market.
B) fewer plums (high-quality) used refrigerators would be on the market.
C) fewer lemons (low-quality) used refrigerators would be on the market.
D) the same total number of used refrigerators would be on the market, but more of them would be plums (high-quality) used refrigerators.

Question 53

Figure 9.5
Figure 9.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 80% of used cameras in the market are lemons (low quality), what percent of used cars sold will actually be plums?

A) 20%
B) 25%
C) 33.33%
D) 75%

Question 54

Table 9.2
Table 9.2 represents 3 markets for used guitars. Which of the markets in Table 9.2 are in equilibrium?

A) 1 only
B) 2 only
C) 3 only
D) 2 and 3

Question 55

Figure 9.4
Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. If buyers believe that 50% of used digital cameras in the market are lemons (low quality), what is consumers' willingness to pay ($W)?

A) $100
B) $200
C) $300
D) $400

Question 56

Figure 9.4
Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. If buyers believe that 50% of used digital cameras in the market are lemons (low quality), how many lemons will be supplied by sellers?

A) 50
B) 60
C) 150
D) 200

Question 57

Figure 9.4
Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. At any price between $X and $Z

A) only plums will be supplied.
B) only lemons will be supplied.
C) both plums and lemons will be supplied
D) neither plums nor lemons will be supplied.

Question 58

Figure 9.3
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), what fraction of used refrigerators sold will actually be lemons (low quality)?

A) 50/250
B) 50/300
C) 250/300
D) All of the refrigerators sold will be lemons.

Question 59

Figure 9.4
Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. Initially buyers believe that 50% of used digital cameras in the market are lemons (low quality). Compared to the outcome with neutral expectations, how many fewer digital cameras are sold in equilibrium?

A) 90
B) 110
C) 140
D) The number of cameras sold in equilibrium is the same as the outcome with neutral expectations.

Question 60

Figure 9.4
Figure 9.4 represents the market for used 12 megapixel digital cameras. Suppose buyers are willing to pay $400 for a plum (high-quality) used digital camera and $200 for a lemon (low-quality) used digital camera. If buyers believe that 50% of used digital cameras in the market are lemons (low quality), what percent of used digital cameras sold will actually be lemons?

A) 25%
B) 50%
C) 75%
D) 100%

Question 61

Table 9.4
In Table 9.4, Market 3 would be in equilibrium if buyers believed plums accounted for

A) 11.11% of the market.
B) 22.22% of the market.
C) 33.33% of the market.
D) 66.67% of the market.

Question 62

Table 9.3
In Table 9.3, Market 2 would be in equilibrium if buyers believed plums account for

A) about 16.67% of the market.
B) about 33.33% of the market.
C) about 66.67% of the market.
D) about 88.89% of the market.

Question 63

When sellers have more information about the quality of a good than buyers do, a relatively large share of the goods in the market will be low-quality goods. This is the ________ problem.

A) free-rider
B) law of diminishing returns
C) adverse selection
D) moral hazard

Question 64

Table 9.4
Table 9.4 represents 3 markets for used motorcycles. Which of the markets in Table 9.4 are in equilibrium?

A) 1 only
B) 2 only
C) 3 only
D) 1 and 3

Question 65

Suppose buyers in the used car market are willing to pay $3,500 for a plum (high-quality) used car and $1,500 for a lemon (low-quality) used car. If buyers believe that 30% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?

A) $2,000
B) $2,500
C) $2,900
D) $3,500

Question 66

Table 9.4
In Table 9.4, Market 1 would be in equilibrium if buyers believed lemons accounted for

A) about 90.91% of the market.
B) about 74.5% of the market.
C) about 63.25% of the market.
D) about 57.65% of the market.

Question 67

Table 9.4
Table 9.4 represents 3 markets for used motorcycles. Which of the markets in Table 9.4 are NOT in equilibrium?

A) 1 only
B) 2 only
C) 3 only
D) 1 and 3

Question 68

Table 9.2
Refer to Table 9.2. In which market do buyers underestimate the chance of getting a lemon?

A) 1 only
B) 2 only
C) 1 and 3 only
D) 2 and 3 only

Question 69

Table 9.3
In Table 9.3, Market 1 would be in equilibrium if buyers believed lemons account for

A) about 83.33% of the market.
B) about 71.43% of the market.
C) about 66.67%% of the market.
D) about 42.86% of the market.

Question 70

Which of the following is NOT an example of the adverse selection problem?

A) Buyers in a market for used cars must choose from an undesirable selection of used cars.
B) An insurance company must choose one price for its coverage for both high-cost and low-cost people.
C) Commercial banks would rather use credit rationing than raising interest rates in the presence of excess demand for loans.
D) An insured motorist drives more recklessly.

Question 71

Table 9.3
In Table 9.3, Market 3 would be in equilibrium if buyers believed lemons account for

A) 45% of the market.
B) 50% of the market.
C) 55% of the market.
D) 60% of the market.

Question 72

Table 9.3
Table 9.3 represents 3 markets for used stereos. Which of the markets in Table 9.3 are NOT in equilibrium?

A) 1 only
B) 2 only
C) 3 only
D) 1, 2, and 3

Question 73

Suppose you notice that the market for used bikes is dominated by lemons (low-quality bikes). In such a situation, if you are a buyer of used bikes, you are faced with

A) a positive externality.
B) perfect information.
C) an adverse selection problem.
D) symmetric information.

Question 74

If the market for used computers has only lemons (low-quality computers) then the market

A) is an example of a thick market.
B) suffers from an adverse selection problem.
C) is a type of monopoly.
D) must be monopolistically competitive.

Question 75

You are responsible for purchasing 20 used computers for your company. Red brand computers cost $1,250 and green brand computers cost $1,800. Based on experience, you believe that 60% of red brand computers are lemons (low quality) while 20% of green brand computers are lemons (low quality). You are willing to pay $1,000 for a known lemon and $2,000 for a known plum. Which brand do you purchase?

A) red
B) green
C) You are indifferent between brands.
D) You don't buy either brand.

Question 76

Table 9.3
Table 9.3 represents 3 markets for used stereos. Which of the markets in Table 9.3 are in equilibrium?

A) 1 only
B) 2 only
C) 3 only
D) none of the above

Question 77

In a market with an adverse selection problem

A) one side of the market has better information about the goods than the other.
B) the uninformed side of the market must choose from an undesirable selection of goods.
C) some high-quality goods are sold but fewer than would be sold in a market with perfect information.
D) all of the above

Question 78

You are responsible for purchasing 25 used cars for your company. Star Brand cars costs $7,500 and Diamond Brand cars cost $6,000. Based on experience, you believe that 20% of Star Brand cars are lemons (low quality) while 40% of Diamond Brand cars are lemons (low quality). You are willing to pay $5,000 for a known lemon and $12,000 for a known plum. Which brand do you purchase?

A) Star
B) Diamond
C) You are indifferent between brands.
D) You don't buy either brand.

Question 79

Table 9.4
Refer to Table 9.4. In which market do buyers underestimate the chance of getting a lemon?

A) 1 and 2 only
B) 1 and 3 only
C) 2 and 3 only
D) none of the above

Question 80

Table 9.3
Refer to Table 9.3. In which market do buyers underestimate the chance of getting a lemon?

A) 1 only
B) 2 only
C) 3 only
D) all of the above