Suppose There Are Only Two Kinds of Cars in the Market

Multiple Choice

Suppose there are only two kinds of cars in the market for used cars: lemons and good cars.A lemon is worth $1,000 both to its current owner and to anyone who buys it.A good car is worth $8,000 to its current and potential owners.Buyers can't tell whether a car is a lemon until after they have bought the car,and there is no warranty.What is the equilibrium price of a used car?

A) $8,000
B) $1,000
C) $4,500
D) $9,000
E) The equilibrium price depends on how many lemons and how many good cars are traded.