The following question deals with the lemon problem and its effect on asset pricing. a. You are in the market for a used car. You know that the book value for the cars you are looking at is in the range 20,000 to 24,000. If you believe the dealer knows as much about the car as you, how much are you willing to pay? Explain.

b. You are in the market for a used car. You know that the book value for the cars you are looking at is either 20,000 or 24,000 with a probability of 50:50. If you believe the dealer knows as much about the car as you, how much are you willing to pay? Explain.

c. Now, you believe the dealer knows more about the cars than you do. How much are you willing to pay? Explain. [Note this is a follow up question to b.].

Amanufacturing firm is considering overhauling the existing compensation strategy. currently every front line employee who works on the assembly line earns the same hourly wage. ideally, management would like to institute a new pay system that involves pay-for-performance. which of the following recommendations is both consistent with scientific management's general emphases and generally good advice for management of this firma. the firm should adopt a differential pay system with one pay level for average performance, and a higher level for good performance. b. the firm should adopt a differential pay system, but the firm should modify it from its original design and provide many different levels of pay associated with different performance levels. c. the firm should understand worker psychology and to focus on pay as the key motivator. d. all of the abovee. none of the above