1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
zalisa [80]
2 years ago
9

Consumers know that some fraction x of all new cars produced and sold in the market are defective. The defective ones cannot be

identified except by those who own them. Cars do not depreciate with use. Consumers are risk-neutral and value nondefective cars at $10,000 each. New cars sell for $8,000 and used ones for $2,000. (Note that since buyers are risk-neutral, the price of a new car reflects the expected value of purchasing a car that may or may not be defective.)What is the fraction x?Instructions: Enter x as a number rounded to two decimal places. For example, if x = 1/3 enter 0.33.
Business
1 answer:
fredd [130]2 years ago
6 0

Answer:

0.25

Explanation:

Given :

The $\text{consumers value}$ the non defective cars = $\$ 10,000$

We will consider all the defective $\text{ cars are used cars}$ only. This is only because the value of the used car is $ 2000 and it is lower than the price of a good car that is $10,000. Thus only defective cars are being sold as the old cars.

For a risk neutral customer, the price that he is ready to give for the new car is the reservation price of a non defective car. It means that (the amount of $ 8000 is the value of the good car x chances of getting a good car) +( the value of the bad car x chances of getting a bad car).

Since we know that x is the fraction of all the cars sold in the market are defective, it means that the fraction of the good cars is 1 - x. Thus putting the values,

$x\times 2000+(1-x)\times 10000=8000$

$10000-8000x=80000$

$8000x=2000$

$x=\frac{2}{8}$

  = 0.25

Thus the value of :

$x=\frac{2}{8} = 0.25$

You might be interested in
The administrative activities of controlling, directing, and coordinating police personnel, resources, and activities in the ser
frozen [14]

Answer:

The statement is describing the functions of police management.

Explanation:

Just like managing a firm, managing the police works in a similar way: police directors have to plan, control, direct, and coordinate all aspects related to the police operations, both on a daily basis, and on a long-term basis.

It is very important to have good police management because police is a service that is public and crucial for citizens. The wrong kind of police management can cause safety and public order problems that can be very disruptive for daily life.

3 0
2 years ago
The Goliath Inc. decides to pay the following dividends over the next three years: $2, $2.6, and $3.38. Thereafter, the company
pochemuha

Answer:

The solution and complete explanation for the above question and mentioned conditions is given below in the attached document.i hope my explanation will help you in understanding this particular question.

Explanation:

7 0
3 years ago
Read 2 more answers
Rimi currently earns $3300 per month. She has the following monthly debt payment expenses: $80 for credit cards, $130 for studen
vaieri [72.5K]

Answer:

No, her ratio is greater than 37%

Explanation:

Given:

Monthly income = $3,300

Credit card expenses = $80

Student loan expenses = $130

Car payment = $215

All insurances = $1,221

Computation:

Total debt to income ratio = Total debt / Total income

Total debt to income ratio =  (80 + 130 + 215 + 1221) / 3300

Total debt to income ratio = 49.87%  

Housing payments to income ratio = All insurances / Monthly income

Housing payments to income ratio = (1221) / 3300

Housing payments to income ratio = 37%  

No, her ratio is greater than 37%

3 0
3 years ago
Johnson & Coleman has created a new line of premium quality writing desks. The company marketed the product by highlighting
KIM [24]

Answer:

I believe the answer is d

Explanation:

4 0
3 years ago
Amsterdam Company uses a periodic inventory system. For April, when the company sold 700 units, the following information is ava
o-na [289]

Answer: Cost per unit $15.2, cost of good sold $10,640

Explanation:

Weighted Average cost per unit = 15,200/1000

= $15.2

Ending inventory (400 × 15.2)

= 6,080

Cost of good available for sale = 15,200

Cost of good sold (700 × 15.2)

= $10,640

8 0
3 years ago
Other questions:
  • Frankie is in charge of writing a script for a television show, along with six other writers. The script must be finished by the
    8·1 answer
  • Consider the following financial statement information for the Sourstone Corporation: Item Beginning Ending Inventory $11,482 $1
    8·1 answer
  • The United States imposes a tariff on electronics imported from China. Which would be a result? China stops marketing all produc
    14·2 answers
  • You are a professional financial analyst that is employed to help evaluate possible merger and acquisition candidates. You have
    14·1 answer
  • Your company is producing a phone with a new video feature. You need to review design specifications with the production company
    10·2 answers
  • You are 20 years old and have completed your BBA and want to pursue further education but you don’t want to take money from your
    8·1 answer
  • Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter
    13·1 answer
  • What are the advantages and disadvantages of private company​
    8·1 answer
  • The of accounts receivable method uses several percentages to estimate the allowance.
    9·1 answer
  • Suppose a self-regulating economy is in a recessionary gap at the time the Fed enacts expansionary monetary policy. Furthermore,
    6·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!