Exam 36: A: Asymmetric Information

In Rustbucket, Michigan, there are 200 used cars for sale, half of them are good and half of them are lemons. Owners of lemons are willing to sell them for $100. 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 is a large number of potential buyers who are willing to pay $200 for a lemon and $2,100 for a good car. Buyers can't tell good cars from bad, but original owners know.

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers all have marginal products of 12. The community has equal numbers of each type of worker. The local community college offers a course in microeconomics. High-productivity workers think taking this course is as bad as a wage cut of $5, and low-productivity workers think it is as bad as a wage cut of $9.

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers all have marginal products of 16. The community has equal numbers of each type of worker. The local community college offers a course in microeconomics. High-productivity workers think taking this course is as bad as a wage cut of $2, and low-productivity workers think it is as bad as a wage cut of $6.

In Rustbucket, Michigan, there are 200 used cars for sale, half of them are good and half of them are lemons. Owners of lemons are willing to sell them for $300. Owners of good used cars are willing to sell them for prices above $1,300 but will keep them if the price is lower than $1,300. There is a large number of potential buyers who are willing to pay $600 for a lemon and $2,100 for a good car. Buyers can't tell good cars from bad, but original owners know.

Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $4,000 per month. You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity. Kandos, however, have more patience than klutzes. Listening to an hour of dull lectures is as bad losing $200 for a klutz and $150 for a kando. There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $4,000 per month and anybody who does not is paid $1,000 per month

Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $5,000 per month. You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity. Kandos, however, have more patience than klutzes. Listening to an hour of dull lectures is as bad as losing $300 for a klutz and $150 for a kando. There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $5,000 per month and anybody who does not is paid $1,000 per month

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 8,000 used cars on the market is such that the number of used cars of value less than V is . Original owners must sell their used cars. Original owners know what their cars are worth, but buyers can't determine a car's value until they buy it. An owner can either take his car to an appraiser and pay the appraiser $300 to appraise the car (accurately and credibly) or sell the car unappraised. In equilibrium, car owners will have their cars appraised if and only if their value is at least

In Rustbucket, Michigan, there are 200 used cars for sale, half of them are good and half of them are lemons. Owners of lemons are willing to sell them for $200. 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 is a large number of potential buyers who are willing to pay $500 for a lemon and $1,500 for a good car. Buyers can't tell good cars from bad, but original owners know.

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers all have marginal products of 16. The community has equal numbers of each type of worker. The local community college offers a course in microeconomics. High-productivity workers think taking this course is as bad as a wage cut of $2, and low-productivity workers think it is as bad as a wage cut of $4.

In Rustbucket, Michigan, there are 200 used cars for sale, half of them are good and half of them are lemons. Owners of lemons are willing to sell them for $500. Owners of good used cars are willing to sell them for prices above $900 but will keep them if the price is lower than $900. There is a large number of potential buyers who are willing to pay $700 for a lemon and $1,900 for a good car. Buyers can't tell good cars from bad, but original owners know.

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 2,000 used cars on the market is such that the number of used cars of value less than V is . Original owners must sell their used cars. Original owners know what their cars are worth, but buyers can't determine a car's value until they buy it. An owner can either take his car to an appraiser and pay the appraiser $500 to appraise the car (accurately and credibly) or sell the car unappraised. In equilibrium, car owners will have their cars appraised if and only if their value is at least

In Rustbucket, Michigan, there are 200 used cars for sale, half of them are good and half of them are lemons. Owners of lemons are willing pay $200 for a lemon and $2,300 for a good car. Buyers can't tell good cars from bad, but original owners know.

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 4,000 used cars on the market is such that the number of used cars of value less than V is . Original owners must sell their used cars. Original owners know what their cars are worth, but buyers can't determine a car's value until they buy it. An owner can either take his car to an appraiser and pay the appraiser $400 to appraise the car (accurately and credibly) or sell the car unappraised. In equilibrium, car owners will have their cars appraised if and only if their value is at least

Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $5,000 per month. You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity. Kandos, however, have more patience than klutzes. Listening to an hour of dull lectures is as bad as losing $150 for a klutz and $50 for a kando. There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $5,000 per month and anybody who does not is paid $1,000 per month

Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $4,000 per month. You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity. Kandos, however, have more patience than klutzes. Listening to an hour of dull lectures is as bad as losing $150 for a klutz and $50 for a kando. There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $4,000 per month and anybody who does not is paid $1,000 per month

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 5,000 used cars on the market is such that the number of used cars of value less than V is . Original owners must sell their used cars. Original owners know what their cars are worth, but buyers can't determine a car's value until they buy it. An owner can either take his car to an appraiser and pay the appraiser $200 to appraise the car (accurately and credibly) or sell the car unappraised. In equilibrium, car owners will have their cars appraised if and only if their value is at least

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers all have marginal products of 15. The community has equal numbers of each type of worker. The local community college offers a course in microeconomics. High-productivity workers think taking this course is as bad as a wage cut of $2, and low-productivity workers think it is as bad as a wage cut of $4.

Suppose that in Enigma, Ohio, klutzes have a productivity of $1,000 and kandos have a productivity of $4,000 per month. You can't tell klutzes from kandos by looking at them or asking them, and it is too expensive to monitor individual productivity. Kandos, however, have more patience than klutzes. Listening to an hour of dull lectures is as bad as losing $300 for a klutz and $150 for a kando. There will be a separating equilibrium in which anybody who attends a course of H hours of lectures is paid $4,000 per month and anybody who does not is paid $1,000 per month

Suppose that low-productivity workers all have marginal products of 10 and high-productivity workers all have marginal products of 16. The community has equal numbers of each type of worker. The local community college offers a course in microeconomics. High-productivity workers think taking this course is as bad as a wage cut of $3, and low-productivity workers think it is as bad as a wage cut of $5.

Suppose that in New Crankshaft, Pennsylvania, the quality distribution of the 3,000 used cars on the market is such that the number of used cars of value less than V is . Original owners must sell their used cars. Original owners know what their cars are worth, but buyers can't determine a car's value until they buy it. An owner can either take his car to an appraiser and pay the appraiser $100 to appraise the car (accurately and credibly) or sell the car unappraised. In equilibrium, car owners will have their cars appraised if and only if their value is at least