In the used car market, suppose there are nine car owners who are considering selling. The...

In the used car market, suppose there are nine car owners who are considering selling. The quality of their cars, Q, is 0, 1/4, 1/2, 3/4, 1, 1 1/4, 1 1/2, 1 3/4, and 2. The seller’s reservation price is $5,000*Q, and the buyer’s reservation price is $7,500*Q. (a) If the market price for a used car is $10,000, how many car owners would like to sell? (b) Based on expected quality, how many buyers would purchase a car? (c) Describe intuitively how asymmetric affects the market for used cars. Are there any equi librium prices so that supply equals demand?

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Rahul Sunny answered 1 year ago

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