Consider the file named HW8 Asymmetric Information. Assume that the true value of a plum is $40,000 and buyers are well aware of the qualities of the cars and, thus, are willing and able to offer that amount to the sellers of the good cars. Similarly, assume that the true value a lemon is $20,000 and buyer are willing and able to pay that price to lemon owners. In that case, lemons and plums will be sold in the country so that the total number of cars sold will be The following graphs show hypothetical supply functions for lemons (bad cars) and plums (good cars) in a country. For example, they show that if buyers offer $20,000 for a lemon, owners of lemons will be willing to sell 30,000 cars to buyers. If buyers offer $25,000 for a lemon, another 5,000 lemons will come to the market. For simplicity's sake we assume that all the lemons are of the same quality. Similarly, if buyers offer $40,000 for a plum, 30,000 plums will come to the market. If buyers offer $30,000 for a plum, 15,000 plums will come to the market. Again, we assume that all the plums are of the same quality. We also assume that buyers have enough money to be able to pay the prices to the sellers. Supply Function for Lemons $30,000 $27,500 $25,000 $22,500 $20,000 $17,500 $15,000 $12,500 $10,000 $7,500 $5,000 $2,500 2 5000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Number of Lemons Supply Function for Plums $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 5000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 Number of Plums