Question 28
In a market for old cars, there are 200 used cars for sale; half of these cars are good and half of them are lemons (the bad ones). Owners of lemons are willing to sell them for $500. Owners of good used cars are willing to sell them for prices above $1,100 but will keep them if the price is lower than $1,100. There are many potential buyers who are willing to pay $600 for a lemon and $1,700 for a good car. Buyers can’t tell good cars from bad, but original owners know. Based on the above data, answer the given subquestions.
What will be the equilibrium price at which the buyers will buy the cars (in $)? _____________