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Mix of Lemons and Plums in the Week-Old Car Market. Recall the application The Resale Value of a Week-Old Car. Suppose the value of a high-quality week-old car (a plum) is $20,000 (the same as the purchase price of a new car), while the value of a lowquality week-old car (a lemon) is $10,000. Suppose that at a price of $16,000 per car, 6 of 10 cars on the used market are plums and 4 of 10 are lemons. (Related to Application 1 on page 624.)
a. How much is the typical buyer willing to pay for a used car in the mixed market?
b. Is the $16,000 price an equilibrium price? Why or why not?
c. Suppose that for every 10 new cars sold by new-car dealers, 9 are plums and only 1 is a lemon. Why is the equilibrium mix in the used car market different from the mix of new cars sold?
Setup a two-variable regression model (i.e. write down the PRF) to examine the impact of per capita disposable income on real per capita gasoline expenditures.
A purely competitive wheat farmer can sell any wheat he grows for $10 per bushel.His five acres of land show diminishing returns, because some are better suited for wheat production than others. The first acre can produce 1000 bushels of wheat, the..
John's Lawn Mowing Service is a small business that acts as a price taker. John's short-run total cost is given by STC = 0.1q2 + 10q + 50, where q is the number of acres John chooses to cut a day. Total fixed cost is TFC = 50 and total variable co..
.determine the amount of slack or surplus for each constraint (dont worry about this problem it has been emitted from the homework but if you can help me to understand this I would greatly apprecaite it) suppose the objective function is changed to..
Manufacturing technology of 2st generation becomes available in 1960. For what values of parameter μ would country-f adapt it if countries operate in autarky.
Consider the following production function: Y K.5 ( AN ) .5 , where both the population and the pool of labor are growing at a rate n .07, the capital stock is depreciating at a rate d .03, and A is normalized to 1.
A city government wants to raise $3 million by issuing bonds. By ballot proposition, the bond's coupon interest rate was set at 8% per year with semiannual payments. However, market interest rates have risen to a nominal 9% interest rate.
Suppose the market for cigarettes is characterized by the following information: Qd=70-5P [Demand] Qs=3P-10 [Supply] Suppose the government imposes a sales tax of $2 per unit. i) Calculate the magnitude of the consumer surplus and producer surplus i..
Suppose that worker skills can be measured in efficiency units, and that efficiency units are distributed in the population such that worker 1 has 1 efficiency unit, worker 2 has 2 efficiency units, etc.
you are the manager of a monopoly. a typical consumers inverse demand function for your firms product is p 250 - 40q
There are 300 purely competitive farms in the local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $24 for every $300 invested. What is their percentage of rate of return.
Suppose that two people, Michelle and James each live alone in an isolated region. They each have the same resources available, and they grow potatoes and raise chickens. If Michelle devotes all her resources to growing potatoes
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