For this problem, use the fact that the expected value of an event is a probability weighted average, the sum of each probable outcome multiplied by the probability of the event occurring.

You are in the market for a used car. At a used car lot, you know that the blue book value for the cars you are looking at is between

$15,000

and

$20,000.

If you believe the dealer knows more about the cars than you, how much are you willing to pay? Assume that you care only about the expected value of the car you buy and that the car values are symmetrically distributed.

You are willing to pay

$enter your response here.

(Round your response to the nearest whole number.)

Part 2

Can this problem be resolved in a competitive market?

A.

No, the dealer will always have more information about the car than you.

B.

Yes, you can obtain more information about the car that you would like to buy.