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?

Question

Quizplus · Accepted Answer

Given that buyers value high-quality bikes at $200 and low-quality bikes at $50, and they believe there's a 50% chance of getting either, the amount they're willing to pay is the average of these two values: (200 + 50) / 2 = $125.

Figure 9.1 -Figure 9.1 Represents the Market for Used Bikes. Suppose Buyers