Tim Has Just Inherited a Signed Wayne Gretzky Hockey Jersey,which

question 135

Multiple Choice

Tim has just inherited a signed Wayne Gretzky hockey jersey,which he would like to sell.His reservation price for the jersey is $500,and he can either place an ad in the local newspaper for $10 or sell the jersey on eBay,which will charge him 5% of the selling price.The local buyer with the highest reservation price is willing to pay $750 at most,while the two eBay bidders with the highest reservation prices are willing to pay $1,200 and $1,000,respectively.(Note that,in an eBay auction,the bidder with the highest reservation price wins,and the price paid is the reservation price of the second-highest bidder. )
-Refer to the information above.If Tim sells his jersey on eBay,the winning bidder's economic surplus will be ________.

• A) $450.
• B) $250.
• C) $200.
• D) $50.
• E) $0.

---

Definitions:

Terms of Agreement

A set of conditions and stipulations agreed upon by parties entering a contract or negotiation.

Outside Options

Alternatives available to the parties involved in a negotiation or transaction if the current deal does not materialize.

Bargaining Power

The relative capacity of one party in a negotiation to influence the terms of an agreement.

Competing Restaurant

An eatery that operates in the same market segment and targets a similar customer base as another restaurant, thus being in direct competition.