Consider the used-car market for the 2011 Citrus described in Section 4.B. There is now a surge in..

Consider the used-car market for the 2011 Citrus
described in Section 4.B. There is now a surge in demand for used Citruses;
buyers would now be willing to pay up to $18,000 for an orange and $8,000 for a
lemon. All else remains identical to the example in Section 4.B.

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Consider the used-car market for the 2011 Citrus described in Section 4.B. There is now a surge in..
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(a) What price would buyers be willing to pay for a 2011
Citrus of unknown type if the fraction of oranges in the population, f, were
0.6?

(b) Will there be a market for oranges if f 5 0.6?
Explain.

(c) What price would buyers be willing to pay if f were
0.2?

(d) Will there be a market for oranges if f 5 0.2?
Explain.

(e) What is the minimum value of f such that the market
for oranges does not collapse?

(f) Explain why the increase in the buyers’ willingness
to pay changes the threshold value off , where the market for oranges collapses.

 

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