1. 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% 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?
2.. Automobile insurance companies charge lower rates to married individuals than they do
to unmarried individuals. What economic reason is there for such a practice? Is it fair?