Appendix: Suppose that a private firm wants to go public to give the owners a chance to retire. It follows the lead of the Google IPO by using a modified Vickrey (or uniform price) auction. The owners of the firm plans to sell 1 million shares and hope to raise at least $10 million from the auction. The following bids were submitted. Bob 250,000 shares at $12 Sam 350,000 shares at $13 Mary
300,000 shares at $9 Sue 100,000 shares at $10 Ravi 450,000 shares at $11
a. The market clearing price is $13, and the sellers of the firm get $13 million.
b. The market clearing price is $12, and the sellers of the firm get $13 million.
c. The market clearing price is $11, and the sellers of the firm get $11 million.
d. The market clearing price is $10, and the sellers of the firm get $10 million.
e. The market clearing price is $9, and the sellers of the firm get$9 million
c
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A speculator becomes the fixed-rate payer in an interest rate swap. He expects that
A) long rates rise. B) long rates fall. C) short rates rise. D) short rates fall.
Answer the following statement(s) true (T) or false (F)
1. The supply curve for the entire market looks like a staircase. 2. Total welfare gains are the difference between consumer and producer surpluses. 3. A deadweight loss is the reduction in both consumer and producer surpluses. 4. If consumers valued the last unit of a product by more than it cost to produce, then welfare could be increased by producing less output. 5. Sometimes innocent bystanders are impacted by the decisions of buyers and sellers.
If Sam, the Pizza Man, lowers the price of his pizzas from $6 to $5 and finds that sales increase from 400 to 600 pizzas per week, then the demand for Sam's pizzas in this range is:
A. inelastic. B. elastic. C. unit elastic. D. inferior.
If a constant-cost, perfectly competitive industry experiences an increase in the demand for its product, we would expect
A. decreases in the market price, but increases in quantity supplied. B. only the quantity supplied of the product to increase. C. only the market price of the good to increase. D. both the market price and quantity supplied to increase.