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Alf and Bill are bidding in a conventional English auction for an object of unknown market value: Alf's valuation of the object is Ta, Bill's valuation is Tb and the true value is expected to be Ta + Tb, but at the time of the auction neither bidder knows the other's valuation. However, it is common knowledge that Ta and Tb are drawn from a rectangular distribution with support [T , T ]. 1. What is the expected value of the object? 2. From Alf's point of view, what is the expected value of the object, condi- tional on his winning the object?
3. Show that the price 2 min {Ta, Tb1 is an equilibrium.
4. Suppose Alf followed a policy of bidding Ta + ETb and believed that Bill was following the same type of policy. Why might this bidding policy lead to an unfavourable outcome for the winner? (a phenomenon known as "the winner's curse").(Klemperer 1998)
Would the accumulation of historical prices and quantities exchanged in the market establish a long-run supply curve? How would the historical relationship differ from how firms (and economists) envision today's long-run supply in the industry?
You are the manager of a business in a competitive market and your production technology is described by the total cost function (q) = 150 + 5q +(1/10)q2 In addition, assume the market price is p = 15 dollars.
Analyze the import challenges and select one challenge and offer suggestions for improving the list of recommended actions.
The sense of smell erodes due to olfactory fatigue
The market where business sell goods and services to households and the government and The largest source of household income in the U.S - Considering an economy with a current trade deficit and considering only the direct effect on income, an expan..
How may you apply what you learned about supply and demand from the simulation to your workplace or your understanding of a real-world product with which you are familiar?
Give an example of how the Principle of Opportunity Cost applies to your life. Think of a recent decision you made. It could be a decision as simple as whether to eat out or cook your own dinner, or it could be a decision to quit your job and go back..
Suppose the market for gelato is perfectly competitive, and that gelato is a constant cost industry. The long-run cost function for producing gelato is TC(Q) = Q^3 ? 2Q^2 + 5Q. The demand for gelato is Q = 300 - 2p. What is the long-run equilibrium p..
Identify some of the costs (pecuniary and nonpecuniary) associated with the antitrust behavior - were the firms investigated for antitrust behavior?
Transfers. Why would cash transfers typically be preferred by recipients over in-kind transfers? What are the pros and cons of each from a government perspective? Respond to at least two of your classmates.
The prisoner-of-war camp described by Radford in the text (Application Box 7.1) periodically received large shipments of cigarettes from the Red Cross or other sources. How did cigarette shipments affect the price level (the prices of goods in terms ..
How much oil does the Department of Energy's Energy Information Service (EIS) predict the ANWR will produce?
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