Suppose you are planning to sell your house. You value your house at $150,000. If you do not hire a realtor, you will be able to sell your house to a buyer whose reservation price is $180,000. If you hire a realtor, you will be able to sell your house to a buyer whose reservation price is $200,000. Assume that the realtor's opportunity cost of negotiating the sale is $10,000. In this case, does using a realtor to sell your house increase total economic surplus?
A. It depends on the sales price of the house, which isn't given in the question.
B. No, because you value the house at $150,000 no matter who buys it.
C. No, because your house only generated economic surplus when it was first built.
D. Yes, using a realtor increases total economic surplus by $10,000.
Answer: D
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