In Section 8.4 we studied the case of a government-mandated ban on the sale of lowquality cars. Review the basic assumptions of the Akerlof model, assume that car quality Xi is distributed uniformly...

In Section 8.4 we studied the case of a government-mandated ban on the sale of lowquality cars. Review the basic assumptions of the Akerlof model, assume that car quality Xi is distributed uniformly from 0 to 100, and assume that the buyer and seller utility functions are as originally supposed in equation (8.1).

a. Let the government-mandated minimum quality be denoted as B. If B = 50, this means car i can only be offered on the market if Xi ≥ 50. What is the range of prices, if any, that would allow transactions if B = 50?

b. What if B = 90? B = 5?

c. Find the smallest B for which you can still find prices that will allow transactions to occur. If there is no minimum, explain why not.