1.Double Ignorance. Suppose both buyers and sellers of used cars are ignorant: No one can distinguish between lemons and plums. Would you expect the market to be dominated by lemons? Illustrate with a...

1.Double Ignorance. Suppose both buyers and sellers of used cars are ignorant: No one can distinguish between lemons and plums. Would you expect the market to be dominated by lemons? Illustrate with a completely labeled graph.

2. Groucho Club. Consider a classic quip from Groucho Marx: “I won’t join any club that is willing to accept me as a member.” Suppose Groucho wants to associate with high-income people (the higher the income the better) and everyone else has the same preferences as Groucho.

a. Use the notion of adverse selection to explain this quip.

b. Relate the quip to the adverse-selection problem.