1.There is asymmetric information in the used-car market because
(buyers/sellers) cannot distinguish between lemons and plums but
(buyers/sellers) can.
2. The supply curve for high-quality used cars lies
(above/below) the supply curve for lowquality used cars.
3. The following table shows the prices and quantities in three different used-cars market. Complete the table by filling the last two rows.
4. We will have a thin market for used cars if the minimum supply price for plums (high quality) is
(greater than/less than) the willingness to pay for a lemon.
5. Arrows up or down: A decrease in the minimum supply price for a plum (high quality) shifts the plum supply curveand the likelihood of buying a plum
.
6. Suppose you are willing to pay $2,000 for a low-quality used car and $10,000 for a high-quality used car. If there is a 70 percent chance of getting a low-quality car and a 30 percent chance of getting a high-quality car, you are willing to pay
for a used car.
7. In baseball, a puzzling feature of the free-agent market is that pitchers who switch teams are more prone to injuries than pitchers who don’t. This feature is explained by and
. The new team has
(more/less) information because it has interacted
(more/less) with the player to know whether he is likely to suffer from injuries that prevent him from playing. (Related to Application 1 on page 645.)