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Business, 21.06.2020 15:57 nuconteaza119

Consider a second hand car market where three types of cars are being sold: High quality (H), medium quality (M) and low quality (L). Sellers value an H at $2000, an M at $1200 and an L at $800, whereas buyers value an H at $1800, an M at $1600 and an L at $1400. As discussed in the "Akerloļ¬€'s Lemons Market", sellers are able to distinguish between diļ¬€erent quality cars but buyers are not and a buyer believes that in this market 40% of the cars is an H, 30% of the cars is an M and 30% of the cars is an L. a) Determine which type of cars will be sold at the eļ¬ƒcient allocation. b) Determine which type of cars will be sold at the market equilibrium.

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