Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 4,000 used cars on the market is such that the number of used cars of value less than V is V/2.Original owners must sell their used cars.Original owners know what their cars are worth, but buyers can't determine a car's quality until they buy it.An owner can either take his car to an appraiser and pay the appraiser $100 to appraise the car (accurately and credibly)or sell the car unappraised.In equilibrium, car owners will have their cars appraised if and only if the car's value is at least
A)$2,000.
B)$100.
C)$300.
D)$200.
E)$400.

Question

Quizplus · Accepted Answer

If an owner believes their car's value is greater than or equal to $200, they will have the car appraised.
If the appraised value is less than $200, they will not sell the car.
If the appraised value is greater than or equal to $200, they will sell the car for the appraised value.
If the appraised value is $V, the owner will pay the appraiser $100 if $V/2 >= $200, which simplifies to $V >= $400. Therefore, the minimum value for an owner to have their car appraised is $400/2 = $200.

Suppose That in New Crankshaft, Pennsylvania, the Quality Distribution of the 4,000