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7. Suppose the market for used cars is as shown below. Buyers cannot tell whether any given car is a lemon, but they know what
7. Suppose the market for used cars is as shown below. Buyers cannot tell whether any given car is a lemon, but they know what percentage of all cars are lemons, P p S S 2000- D 1800- 1000- 800- -Q -Q Lemons per year Good cars per year a. What will happen in this market if the percentage of lemons is 10%? b. How does your answer differ if the percentage of lemons is 409%? What type of market failure does this reveal? Explain
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