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Consider two types of used cars and the following information: Description Peaches Lemons Buyer's Value $12,000 $7,000 $10,500 $6,000 Seller's Value Proportions 3 5 (a)

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Consider two types of used cars and the following information: Description Peaches Lemons Buyer's Value $12,000 $7,000 $10,500 $6,000 Seller's Value Proportions 3 5 (a) If a buyer can not distinguish the quality of cars oftered for sale, and risk neutrality is assumed, which cars will be offered for sale, and at what price? (b) Discuss the significance of the example above to financial intermediaries

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