If you are willing to pay $1,000 for a used stereo that is a “cherry” and $200 for a used stereo that is a “lemon,” how much will you be willing to offer to purchase a stereo if there is a 50 percent chance that the stereo is a lemon? If owners of cherry stereos want $700 for their cherries, how will your estimate of the chance of getting a cherry change?

Answer rating: 100% (QA)

Answer One would be willing to offer 600 for a used ste... View the full answer