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Papessa [141]
2 years ago
7

Suppose that there is asymmetric information in the market for used cars. Sellers know the quality of the car that they are​ sel

ling, but buyers do not.Buyers know that there is a 40​% chance of getting a​ "lemon", a low quality used car. A high quality used car is worth​ $30,000, and a low quality used car is worth​ $15,000.Based on this​ probability, the most that a buyer would be willing to pay for a used car is ​$
Business
1 answer:
denis23 [38]2 years ago
8 0

Answer:

A buyer would be willing to pay at most $24,000.

Explanation:

There is a 40% chance of getting low quality cars.

Value of high quality car is $30,000.

Value of low quality car is $15,000.

Price of car that buyer will be willing to pay

=40% of lower quality+60% of higher quality

=40% of $15,000+60% of $30,000

=0.4*15,000+0.6*30,000

=$6,000+$18,000

=$24,000

So, the buyers will be willing to pay a maximum value of $24,000.

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2 years ago
Decisión grids are valuable tools because they help us
jenyasd209 [6]

Answer:

There are any number of valid responses – <em>see below</em>.

Explanation:

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3 years ago
A business ____ is the way a company operates to generate revenues and remain a viable entity.
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3 years ago
Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million gallons a day were sold. In October 2004, the
Alenkinab [10]

Answer:

0.15

Inelastic

Explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = midpoint change in quantity demanded / midpoint change in price  

Midpoint change in quantity demanded = change in quantity demanded / average of both demands

change in quantity demanded = 14 million  - 15 million =  -1 million  

average of both demands = (14 million + 15 million  ) / 2 = 14.50 million

Midpoint change in quantity demanded =  -1 million  / 14.50 million = -0.069

midpoint change in price = change in price / average of both price

change in price = $2.15 - $1.35 = $0.80

average of both prices = ( $2.15 + $1.35 ) / 2 = $1.75

midpoint change in price = $0.80 /  $1.75 = 0.457

-0.069 / 0.457 = 0.15 demand is inelastic  

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.  

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.  

Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases  

Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price.

 

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3 years ago
"A proposed new project has projected sales of $201,000, costs of $93,000, and depreciation of $25,400. The tax rate is 22 perce
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Cash Flow = $89,828.

Explanation:

Detail is given in the picture attached.

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