You are in the market for a used 2013 Honda Accord. You know that half of the 2013 Accords are lemons and half are peaches. If you could be assured that the Accord you were buying was a peach, you would be willing to pay up to $10,000. On the other hand, you would only be willing to pay $2,000 for a lemon. You have no ability to discern whether any particular Accord is a lemon or a peach. Sellers of Accords, on the other hand, are likely to know whether their particular car is a lemon or a peach. Suppose sellers of lemons will sell their cars for $1,500 or more and peach sellers will be willing to sell their cars for $8,500 or more. You are willing to offer ________ for a car of unknown quality and ________ are willing to sell you their car.
A. $2,000; lemon owners only
B. $5,000; lemon owners only
C. $6,000; lemon owners only
D. $8,500; both lemon and peach owners
Answer: C
Economics
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The "Four Freedoms" do NOT include the right to
A) vote in local elections. B) migrate within the EU. C) write insurance policies throughout the EU. D) open bank accounts anywhere in the EU. E) move goods from one country to another inside the EU.
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The economy recovers quickly from most recessions, but the increase in adverse selection and moral hazard problems in the credit markets caused by ________ led to the severe economic contraction known as The Great Depression
A) debt deflation B) illiquidity C) an improvement in banks' balance sheets D) increases in bond prices
Economics