1. Suppose there are only two kind 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.

$9,000

D.

$4,500

E.

The equilibrium price depends on how many lemons and how many good cars are traded.

2. Which of the following are features of Obamacare?

i. Pre-existing condictions are covered.

ii. Efficiency is created in the health insurance market.

iii. Subsidies are offered to low-income people.

A.

i only.

B.

i, ii, and iii.

C.

i and iii only.

D.

ii and iii.

E.

ii only.