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)

Question

Quizplus · Accepted Answer

If buyers believed that fewer than 50% of used refrigerators are lemons (low-quality), they would be more willing to pay a higher price for a used refrigerator, as they have higher expectations of the quality of the product. This would increase the demand for high-quality (plum) used refrigerators, causing more sellers to put them on the market. Therefore, there would be more plums (high-quality) used refrigerators on the market.

Figure 9.3 -Figure 9.3 Represents the Market for Used Refrigerators. Suppose Buyers