Consumers know that some fraction of x of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Cars do not depreciate with use. Consumers are risk-neutral and value non defective cars at $12,400 each. New cars sell for $4,000 and used cars for $2,400.
What is the value of x?
Note: round your answer to two decimal places for full marks.
2.For a elementary-school teacher and a real estate agent, identify the one for which the kind of car a person drives is more likely to be a good indication of how good she is at her job.
