Question

Milo is interested in buying a used car he found advertised on the internet. The owner is asking for $11,200. Milo isn’t sure whether or not that’s a good deal. How can he take the outside view?

Answer 1

Marvin should consider that prices reflect information in the used car market and balance the risk associated with cheaper prices.

Step-by-step explanation:

When considering buying a used car, Marvin should take into account that prices reflect information, even with imperfect information. Used cars may be more expensive on dealer lots because dealers try to fix underlying problems to maintain their reputation. On the other hand, cars sold by individual sellers on platforms like Craigslist may have cheaper prices but also come with higher risks. Marvin should balance his risk appetite and consider the potential for more trips to the repair shop.