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?

Question

Quizplus · Accepted Answer

If buyers believe that 50% of the cameras are lemons, they will be willing to pay an average price of $300. Sellers of plums will not sell at this price, leaving mostly lemons in the market, increasing the percentage of lemons sold.

Figure 9.4 -Figure 9.4 Represents the Market for Used 12 Megapixel Digital