Suppose the prices in each segment under perfect information are as shown in the table below.

A reservation price is the lowest price a seller will accept. Also assume that buyers are risk-neutral and therefore are interested only in the average quality of the cars sold in the used car market. The lemons model assumes an equal number of lemons and cherries in the initial analysis in order to simplify calculations. Consider more generally what happens based on different percentages of lemons in the market.
a. What percentage of lemons and cherries are sold if the price is above the cherry seller's reservation price of $8,000? What percentage of lemons and cherries are sold if the price is below the cherry seller's reservation price of $8,000?
b. Suppose 10 percent of used cars are lemons. What will be the market-clearing price given asymmetric information? What portion of used cars sold will be lemons?
c. Suppose 25 percent of used cars are lemons. What will be the market-clearing price given asymmetric information? What portion of used cars sold will be lemons?
d. Suppose 50 percent of used cars are lemons. What will be the market-clearing price given asymmetric information? What portion of used cars sold will be lemons?
e. Given the reservation and market-clearing prices in the table above, what is the highest proportion of lemons in the used car market, s that will produce a market equilibrium in which all used cars are sold? What happens if the proportion of lemons in the used car market is higher than s?
f. Suppose that, instead of the good used car owners having a reservation price of $8,000, they had a reservation price of $7,000 but all other prices are as described in the table in Problem 6. How would your answer to part e change in this instance?

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Perfect Information Seller's Reservati Marketing Clearing Price $4,000 $10,000 Prices Lemon: bad Cherry: good Price $3,000 $8,000