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Alex is looking to buy a used car and know that 80% of the cars in this market are good used cars and 20% are
Alex is looking to buy a used car and know that 80% of the cars in this market are good used cars and 20% are defective. The value of a good used car is $15,000 and the value of a defective used car is $8,000.
- If Alex can't tell the quality of the car before he buys it, what is the expected value for cars in this market?
- If the market price is $8,000 will Alex buy a car?
- If you were the owner of a good car, how could you credibly communicate the quality of your car to potential buyers?
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