Exam 16: Auctions-Part B

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A dealer decides to sell an antique automobile by means of an English auction with a reservation price of $900.There are two bidders.The dealer believes that there are only three possible values that each bidder's willingness to pay might take, $6,500, $3,600, and $900.Each bidder has a probability of 1/3 of having each of these willingnesses to pay, and the probabilities of the two bidders are independent of the other's valuation.Assuming that the two bidders bid rationally and do not collude, the dealer's expected revenue from selling the automobile is

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Question 21

An antique cabinet is being sold by means of an English auction.There are four bidders, Kitty, Gloria, Judy, and Cindy.These bidders are unacquainted with each other and do not collude.Kitty values the cabinet at $800, Gloria values it at $500, Judy values it at $1,700, and Cindy values it at $700.If the bidders bid in their rational self-interest, the cabinet will be sold to

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Question 22

Jerry's Auction House in Purloined Hubcap, Oregon, holds sealed-bid used-car auctions every Wednesday.Each car is sold to the highest bidder at the second-highest bidder's bid.On average, 2/3 of the cars that are auctioned are lemons and 1/3 are good used cars.A good used car is worth $3,000 to any buyer.A lemon is worth $150 to any buyer.Most buyers can do no better than picking at random from among these used cars.The only exception is Al Crankcase.Recall that Al can sometimes detect lemons by tasting the oil on the car's dipstick.A good car never fails Al's test, but half of the lemons fail his test.Al attends every auction, licks every dipstick, and bids his expected value of every car given the results of his test.Al will bid

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Question 23

First Fiddler's Bank has foreclosed on a home mortgage and is selling the house at auction.There are three bidders for the house, Jesse, Shelia, and Elsie.First Fiddler's does not know the willingness to pay of any of these bidders but on the basis of its previous experience believes that each of them has a probability of 1/3 of valuing the house at $800,000, a probability of 1/3 of valuing it at $300,000, and a probability of 1/3 of valuing it at $100,000.First Fiddler's believes that these probabilities are independent between buyers.If First Fiddler's sells the house by means of a second-bidder, sealed-bid auction (Vickrey auction), what will be the bank's expected revenue from the sale? (Choose the closest answer.)

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Question 24

An antique cabinet is being sold by means of an English auction.There are four bidders, Arabella, Lana, Hester, and Betsy.These bidders are unacquainted with each other and do not collude.Arabella values the cabinet at $1,000, Lana values it at $500, Hester values it at $1,300, and Betsy values it at $800.If the bidders bid in their rational self-interest, the cabinet will be sold to

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Question 25

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Exam 16: Auctions-Part B

Budget Constraint-Part A

Budget Constraint-Part B

Preferences-Part A

Preferences-Part B

Utility-Part A

Utility-Part B

Choice-Part A

Choice-Part B

Demand-Part A

Demand-Part B

Revealed Preference-Part A

Revealed Preference-Part B

Slutsky Equation-Part A

Slutsky Equation-Part B

Buying and Selling-Part A

Buying and Selling-Part B

Intertemporal Choice-Part A

Intertemporal Choice-Part B

Asset Markets-Part A

Asset Markets-Part B

Uncertainty-Part A

Uncertainty-Part B

Risky Assets-Part A

Risky Assets-Part B

Consumers Surplus-Part A

Consumers Surplus-Part B

Market Demand-Part A

Market Demand-Part B

Equilibrium-Part A

Equilibrium-Part B

Auctions-Part A

Technology-Part A

Technology-Part B

Profit Maximization-Part A

Profit Maximization-Part B

Cost Minimization-Part A

Cost Minimization-Part B

Cost Curves-Part A

Cost Curves-Part B

Firm Supply-Part A

Firm Supply-Part B

Industry Supply-Part A

Industry Supply-Part B

Monopoly-Part A

Monopoly-Part B

Monopoly Behavior-Part A

Monopoly Behavior-Part B

Factor Markets-Part A

Factor Markets-Part B

Oligopoly-Part A

Oligopoly-Part B

Game Theory-Part A

Game Theory-Part B

Game Applications-Part A

Game Applications-Part B

Behavioral Economics

Exchange-Part A

Exchange-Part B

Production-Part A

Production-Part B

Welfare-Part A

Welfare-Part B

Externalities-Part A

Externalities-Part B

Information Technology-Part A

Information Technology-Part B

Public Goods-Part A

Public Goods-Part B

Asymmetric Information-Part A

Asymmetric Information-Part B

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