Assume that the seller knows the quality and the value of a used good but that the buyer does not. Assume that the seller knows his product is of a bad quality. Assume that this good, if in good quality, is worth 10 000 (for the seller and the buyer) and if it is in bad shape, is worth only 1 000 (for the seller and the buyer). A) Now assume that most of the units on the used market are good quality. What has to be the minimum proportion of good quality products in the market such that the seller can obtain 6 000 for his good.

Assume that the seller knows the quality and the value of a used good but that the buyer does not. Assume that the seller knows his product is of a bad quality. Assume that this good, if in good quality, is worth 10 000 (for the seller and the buyer) and if it is in bad shape, is worth only 1 000 (for the seller and the buyer). A) Now assume that most of the units on the used market are good quality. What has to be the minimum proportion of good quality products in the market such that the seller can obtain 6 000 for his good.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: The Basic Tools Of Finance

Section: Chapter Questions

Problem 5PA

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