Consumers know that some fraction x of all new cars produced and sold in the market are

Question:

Consumers know that some fraction x of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Cars do not depreciate with use. Consumers are risk-neutral and value non-defective cars at $10,000 each. New cars sell for $5,000 and used ones for $2,500. What is the fraction x?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Principles of Economics

ISBN: 978-0073511405

5th edition

Authors: Robert Frank, Ben Bernanke

Question Posted: