In the used car market,with a pooling equilibrium the price of a lemon is ________ the price of a good used car and with a separating equilibrium the price of a lemon is ________ the price of a good used car.
A) less than; equal to
B) equal to; less than
C) equal to; more than
D) more than; more than
E) equal to; equal to

Question

Quizplus · Accepted Answer

In a pooling equilibrium, the market cannot differentiate between good cars and lemons, so they are priced the same. In a separating equilibrium, the market can differentiate between them, so lemons are priced lower than good used cars.

In the Used Car Market,with a Pooling Equilibrium the Price