Figure 9.5
-Figure 9.5 represents the market for used cars. Suppose buyers are willing to pay $5,000 for a plum (high-quality) used car and $3,000 for a lemon (low-quality) used car. If buyers believe that 80% of used cameras in the market are lemons (low quality), what percent of used cars sold will actually be plums?

Question

Quizplus · Accepted Answer

If buyers believe that 80% of the cars are lemons, they will be willing to pay a weighted average price based on this belief. The actual percentage of plums sold will match the buyers' belief, which is 20%.

Figure 9.5 -Figure 9.5 Represents the Market for Used Cars. Suppose Buyers