Let's consider the market for used cars as analyzed by Akerlof (1970).1 The quality or value of the used car to the seller, Xi, is not observable directly, but buyers know the distribution of Xi has the form: Xi Uniform[q1, q2]. For all the following questions, assume that buyers have a utility for any car that is 50% greater than its quality (or, equivalently, 50% greater than its value to a seller)