The market for used sleighs heats up every winter (get the pun?!!) because people love riding around in the snow in a horse-drawn sleigh. In this market, there are many buyers and many sellers. The market consists of 60% poor-quality sleighs and 40% good quality sleighs. The buyers know this proportion but sadly they can't tell before purchasing which is poor and which is bad. Further, because of a peculiar law, you can't have a sleigh mechanic look at it and you can't drive-before-you-buy. Buyers value a poor sleigh at $5,000 and a good sleigh at $15,000. Sellers have minimum reservation prices of $7,500 for poor sleighs and $11,000 for good ones.

a) (10) Is this a lemons market? Fully explain your answer.

b) (10) If you determined it is a lemons market, what would the reservation prices have to be so that all sleighs sell? If you determined it's not a lemons market, what would the reservation prices have to be so that it becomes a lemons market?

c) (10) Alternately (i.e. starting with the original values you used in part a), ff you determined it is a lemons market, what would the MIX of poor/good quality sleighs (e.g. 50%/50%) have to be so that it is no longer a lemons market? If you determined it's not a lemons market, the MIX of poor/good quality sleighs (e.g. 50%/50%) have to be so that it becomes a lemons market?