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12 inaperfectlycompetitivemarketpen0 a

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Unformatted text preview: ways allows the consumer more choices than a subsidized price of equal value for one commodity. (v) The government should not provide cash grants because the consumption of food does not rise as people make poor decisions about how they should spend unconditional grants. Which of the following combinations are true? A. B. C. D. E. (i) & (iv) (ii),(iii) & (v) (i), (iii) & (v) (i), (iv) & (v) Abstain 8 Use the information below to answer questions 12‐15. Consider the market for second hand cars. There are good quality cars, with a quality value of β = 8000 and bad quality cars with a quality value of β = 2000. Both types of cars occur with equal probability in the market. Buyers are willing to buy a car, as long as 3 the price, p, is such that p ≤ β , while sellers are willing to sell their car as long as 2 p ≥ β . 12. In a perfectly competitive market, [Pen. 0] A. all cars will be traded at the equilibrium price of 3000 . B. good quality cars will only be sold if 2000 ≤ p ≤ 3000 C. bad qu...
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