Consider two types of used cars and the following information:

a) If a buyer can not distinguish the quality of cars offered 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.

Description Buyer's Value Seller's Value Proportions Peaches $12,000 $10,500 3 Lemons $7,000 $6,000 5 Description Buyer's Value Seller's Value Proportions Peaches $12,000 $10,500 3 Lemons $7,000 $6,000 5