Suppose there are only two kind of cars in the market for used cars: lemons and good cars. A lemon is worth $1,000 both to its current owner and to anyone who buys it. A good car is worth $8,000 to its current and potential owners. Buyers can't tell whether a car is a lemon until after they have bought the car, and there is no warranty. What is the prevailing price of a used car?
A) $8,000
B) $1,000
C) $4,500
D) The prevailing price depends on how many lemons and how many good cars are traded.

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The Answer of Suppose there are only two kind of cars in the market for used cars: lemons and good cars. A lemon is worth $1,000 both to its current owner and to anyone who buys it. A good car is worth $8,000 to its current and potential owners. Buyers can't tell whether a car is a lemon until after they have bought the car, and there is no warranty. What is the prevailing price of a used car?
A) $8,000
B) $1,000
C) $4,500
D) The prevailing price depends on how many lemons and how many good cars are traded.

Suppose There Are Only Two Kind of Cars in the Market