Answered: ) In the market for second hand cars,…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 9MC

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1) In the market for second hand cars, when the phenomenon of 'adverse selection'
occurs this normally refers to the fact that
(a) second hand cars are by definition worse than new cars.
(b) only relatively poor people want to buy second hand cars.
(c) sellers of relatively good cars withdraw from the market .
(d) None of the above.
2) Producer surplus will be zero at any quantity if
(a) supply is perfectly inelastic.
(b) supply is perfectly elastic .
(c) demand is perfectly inelastic.
(d) demand is perfectly elastic.

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