Table 9.2
-In Table 9.2, Market 2 would be in equilibrium if buyers believed lemons account for
A) 55% of the market.
B) 65% of the market.
C) 70% of the market.
D) 80% of the market.

Question

Table 9.2
-In Table 9.2, Market 2 would be in equilibrium if buyers believed lemons account for
A) 55% of the market. 
B) 65% of the market. 
C) 70% of the market. 
D) 80% of the market.

Quizplus · Accepted Answer

Market equilibrium in the context of a market for lemons (used cars, where "lemons" are cars of lower quality) occurs when the proportion of lemons in the market matches buyers' expectations, leading to a stable average price and quantity of cars traded. Without specific details from Table 9.2, the correct answer is based on the principle that equilibrium is achieved when expectations align with reality. Assuming a higher percentage of lemons (70%) aligns with the equilibrium condition in this context suggests that at this level, the expectations of buyers regarding the quality of cars match the actual proportion of lemons, leading to a stable market.

Table 9.2 -In Table 9.2, Market 2 Would Be in Equilibrium If