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Consider the market for lemons problem. Suppose there are six cars of quality Q, distributed evenly from Q=.75 to Q=2. Buyers value Q at

Consider the market for lemons problem. Suppose there are six cars of quality Q, distributed evenly from Q=.75 to Q=2. Buyers value Q at $800; sellers at $600. Sellers know the Q for their cars with certainty, but buyers cannot and therefore assume the average Q. How many cars sell? Is there market failure?

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