Final answer:
The prices of homes in a CMA assist a seller's agent in setting a competitive listing price by comparing the subject property with similar ones on the market, taking into account factors like location and features. Imperfect information can lead to difficulties in market price equilibrium, as buyers might associate price with quality.Option C is the correct answer.
Step-by-step explanation:
The prices of homes currently on the market included in a Comparative Market Analysis (CMA) assist a seller's agent in setting a listing price with the seller in competition with similar properties currently on the market. This means that the CMA helps in determining a competitive price for a home by comparing it to properties that are currently listed for sale. This comparison takes into account various factors including location, size, and features of the homes to ensure the subject property is priced in line with the market to attract potential buyers while also aiming to achieve a fair selling price for the seller.
In terms of market dynamics, when buyers use the market price to draw inferences about the quality of products, markets may struggle to reach an equilibrium price due to imperfect information. For instance, if a used car dealer lowers prices, buyers might wrongly assume the cars are of low quality and be dissuaded from purchasing. Conversely, raising prices might cause buyers to infer that the cars are of higher quality, potentially increasing sales. This demonstrates how imperfect information can impact buyer and seller transactions and affect market equilibrium.