Problem

Given:

• There are two kinds of cars: good (G) and bad (B)

• Good cars are worth $12,000 and bad cars are worth $2,000

• There are 1400 good cars on the market and 600 bad ones

• Buyers can't tell a car's type before buying it

Determine:

(1) The expected value of a random car in the market before any selection effects occur.

(2) Which kinds of owners would want to sell at that price and why?