<p>I have some questions about these three Micro problems. I have the answers, but I’m not sure why they are correct. Can anyone explain? If not, is there anywhere I can go to get help on the web? There used to be a site where you could get live homework help but they’ve shut that down. Thanks!</p>
<p>Quality Buyer’sVal Seller’sVal Fraction
Reliable $26,000 $25,000 5/6
Lemons $20,000 $19,000 1/6 </p>
<p>T/F There is adverse selection in this market under asymmetric information.</p>
<p>The correct answer here is false.</p>
<p>Consider the used cars market. The dealer values a good car at $15000 and a lemon at $9000. The buyers valuation is 18000 for a god car and 10000 for a lemon. There are 100 of each type of car. A good car costs $500 annually to repair, while a lemon?s annual repair cost is $1000. </p>
<p>T/F There is adverse selection here in the case of asymmetric information.</p>
<p>The correct answer here is true.</p>
<p>Consider the used cars market. The dealer values a good car at $15000 and a lemon at $9000. The buyers valuation is 18000 for a god car and 10000 for a lemon. There are 100 of each type of car. A good car costs $500 annually to repair, while a lemon?s annual repair cost is $1000. </p>
<p>T/F Adverse selection can be avoided through a warranty. </p>
<p>The correct answer here is false.</p>