| To answer Problem 8, complete Problem 7 first. Suppose that all of the information from Problem 7 holds except that the portion of lemons in the population is one-half rather than one-third. In this instance, prove that no good used cars will be offered for sale in the market equilibrium. This change affects the equation derived in Problem 7d. Thus, it also changes the weighted average price function in Problem 7f. Once these altered equations are obtained, one need only show that no portion of good used cars sold, G, satisfies the equality required by Problem 7g. |
