Consider a second hand car market where three types of cars are being sold: High quality (H), medium quality (M) and low quality (L). Sellers value an H at $2000, an M at $1200 and an L at $800, whereas buyers value an H at $1800, an M at $1600 and an L at $1400. As discussed in the ”Akerloff’s Lemons Market”, sellers are able to distinguish between different quality cars but buyers are not and a buyer believes that inthismarket40%ofthecarsisanH,30%of thecarsisanM and30%ofthecarsis an L. (a) (10 points) Determine which type of cars will be sold at the efficient allocation. (b) (10 points) Determine which type of cars will be sold at the market equilibrium.