Suppose in the Market for Used Cars, Buyers Would Be

Multiple Choice

Suppose in the market for used cars, buyers would be willing to pay $9,000 for a car in good condition, while buyers would have to incur a cost of $3,500 to repair a car in poor condition.Assume a risk-averse buyer is aware that some of the cars are lemons, but is uninformed about the probability of a car being in good condition or otherwise.What price would this buyer, seeking only to minimize risk, be willing to pay for a car?

A) $3,925
B) $5,500
C) $7,775
D) $5,850