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Question 16 1.5 pts In the used-car market in Sydney there are two types of cars: bad cars and good cars. Owners of the cars
Question 16 1.5 pts In the used-car market in Sydney there are two types of cars: bad cars and good cars. Owners of the cars know what sort of car they have, but to potential buyer all cars look alike (until after they have already been bought). Owners of bad cars are willing to sell their cars for $1000. Owners of good cars are willing to sell their cars for $1600. Buyers have a maximum willingness to pay for a bad car of $1400 and a maximum willingness to pay for a good car of $2400. Buyers are risk neutral, so they maximise their expected return when considering their purchase. If the proportion of good cars is q and the rest of the cars are bad, what is a buyer's expected value (EV) from buying a car? EV = (1 q)1000 + q1600 EV = 2400 EV = (1 q]1400 + q2400 Ey = (1 - [131000 + (12400 None of the other answers are correct
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