PROBLEM #3 [5 points]: Imagine that you are perusing a copy of the Auto Trader magazine in search of a used car. Suppose that there are 50 cars offered for sale and 50 buyers interested in a used car purchase. You know that sellers of "Lemons" (bad quality cars) would be willing to accept $4000 and that buyers would be willing to pay up to $4,500 for a "Lemon". Furthermore, sellers of "Cherries" (good quality cars) would be willing to accept $6000 and that buyers would be willing to pay up to $7000 for a "Cherry\". Assume the form of buyers' guesses about the value of the average car in this market is as follows: I: [willingness to pay for "Lemons\"l + {1 a] [willingness to pay for "Cherries\"l = value of the average car. where u = proportion of "Lemons" in the market and (1 o) = the proportion of "Cherries\" in the market. a} How many "Lemons\" can exist in this market before the market fails [i.e., no "Cherries" will be offered for sale)? [2 points] b] In your own words, offer a unique example (i.e., not covered in our notesftext} of a situation that illustrates the features of either adverse selection or moral hazard. [3 points]