If eight lemons (low quality) and two plums (high quality) are supplied and buyers assume that there is a 40% chance of getting a lemon, there is an equilibrium.

Question

Quizplus · Accepted Answer

An equilibrium occurs when the supply and demand for a good or product are at balance. In this scenario, the supply includes eight lemons and two plums, with a 40% chance of getting a lemon. However, there is no information given about demand or the preferences of the buyers. Therefore, we cannot determine if there is an equilibrium or not.

If Eight Lemons (Low Quality) and Two Plums (High Quality)