Problem
Suppose 100 cars will be offered on the used-car market, 50 of them good cars, each worth $10,000 to a buyer, and 50 of them lemons, each worth $2,000.
a. Compute a buyer's maximum willingness to pay for a car if he or she cannot observe the car's type.
b. Suppose that there are enough buyers that competition among them leads cars to be sold at their maximum willingness to pay. What would the market equilibrium be if sellers value good cars at $8,000? At $6,000?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.