QUESTION 11 In the market for bikes, buyers are not able to tell the quality. They only know that 60% of sellers offer good bikes, while 40% offer old, repeinted tikes A good bike costs 120 the seller, while an old one costs 40. Buyers are risk neutral and attach a value of 200 to good bikes and 50 to old ones. Therefore O Buyers will pay no more than 140 for a bike and so there could be a positive short-nun profit for good bikes sellers, but no greater than 20 O Buyers will pay no more than 125 for a bike and so there could be no positive profits for good bikes sellers Buyers will pay more than 200 for a bike and so there could be a short-run profit for good sellers greater than 75 O Buyers will pay no more than 140 for a bike and so in the short run the maximum profit for good bikes sellers will be greater than the maximum profit for old bikes sellers Buyers will pay no more than 125 for a bike and so in the short run the maximum profit for good bikes sellers will be lower than the maximum profit for old bikes sellers.

QUESTION 11 In the market for bikes, buyers are not able to tell the quality. They only know that 60% of sellers offer good bikes, while 40% offer old, repeinted tikes A good bike costs 120 the seller, while an old one costs 40. Buyers are risk neutral and attach a value of 200 to good bikes and 50 to old ones. Therefore O Buyers will pay no more than 140 for a bike and so there could be a positive short-nun profit for good bikes sellers, but no greater than 20 O Buyers will pay no more than 125 for a bike and so there could be no positive profits for good bikes sellers Buyers will pay more than 200 for a bike and so there could be a short-run profit for good sellers greater than 75 O Buyers will pay no more than 140 for a bike and so in the short run the maximum profit for good bikes sellers will be greater than the maximum profit for old bikes sellers Buyers will pay no more than 125 for a bike and so in the short run the maximum profit for good bikes sellers will be lower than the maximum profit for old bikes sellers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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