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10. When buyers use the market price to draw inferences about the quality of products, then markets may have trouble reaching an equilibrium price and quantity. Which of the following will be true?
a. When the dealer decides to cut the prices of the cars to sell a greater quantity. In a market with imperfect information, many buyers may assume that the lower price implies low-quality cars.
b. Conversely, a dealer who raises prices may find that customers assume that the higher price means that cars are of higher quality; as a result of rising prices, the dealer might sell more cars.
c. Both a and b
10. When buyers use the market price to draw inferences about the quality of products, then markets may have trouble reaching an equilibrium price and quantity. Which of the following will be true?
a. When the dealer decides to cut the prices of the cars to sell a greater quantity. In a market with imperfect information, many buyers may assume that the lower price implies low-quality cars.
b. Conversely, a dealer who raises prices may find that customers assume that the higher price means that cars are of higher quality; as a result of rising prices, the dealer might sell more cars.
c. Both a and b
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Raushan RajLv8
2 Nov 2020