Mr. Smith won a laptop in an online auction in which bidders could see each other's bid and price increased with every new bid
a) If Mr. Smith values the laptop at $400, find out his dominant strategy.
b) Will there be a change in his optimal bidding strategy if there is an increase in the number of bidders?
a) Mr. Smith is participating in an English auction. In an English auction, bidders can see each other's bid and price increases with every new bid. The auctioneer starts bidding at a price below every bidder's willingness to pay and asks who would like to bid. Each bidder should continue to bid until the price reaches his maximum willingness to pay for the good because he has to pay his bid if he wins. Therefore, Mr. Smith should continue bidding as long as the price is below $400. This is his dominant strategy.
b) In an English auction, the optimal bidding strategy of a bidder does not depend on the number of bidders participating in the auction. Each bidder continues to bid as long as price lies below his willingness to pay. The highest bidder wins and pays an amount equal to the second-highest bid (or slightly higher if second-highest bidder bids his highest value exactly).
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A) real interest rate falls; real interest rate is the opportunity cost of consumption B) real interest rate rises; real interest rate is the opportunity cost of saving C) real interest rate falls; real interest rate is the opportunity cost of saving D) real interest rate rises; cost of living is determined by the real interest rate E) real interest rate rises; real interest rate is the opportunity cost of consumption
Solutions to the moral hazard problem include
A) low net worth. B) monitoring and enforcement of restrictive covenants. C) greater reliance on equity contracts and less on debt contracts. D) greater reliance on debt contracts than financial intermediaries.
Explain how firms that each produce as efficiently as they can may not be equally productive
What will be an ideal response?
Which of the following is a normative statement?
a. Fifteen percent of Americans go without health insurance in a year. b. The Consumer Price Index rose three-tenths of one percent in May. c. An increase in the minimum wage will increase teenage unemployment. d. Americans would be better served by single-payer health care system. e. The French trade deficit reached an all-time high last year.