John and Edward Are Negotiating the Sale and Purchase of One

question 55

Multiple Choice

John and Edward are negotiating the sale and purchase of one of John's very expensive paintings.In the course of the negotiations,John says,"I'll sell it to you for $20 000.00,to which Edward replies,"That is a little too much for me; I'll give you $14 500.00." John thinks about this for a moment and says,"No,but I'll take $17 500.00.Edward says,"That is still too much; I'll buy it for $15 500.00.John looks at the painting and replies,"You know it is worth more than that.Why don't you give me $16 500.00 and we'll call it a day." Edward responds with,"I only have $16 000.00 so that is all I will pay for it," to which John replies,"Done." In this case

• A)the contract is for $16 500.00.
• B)the contract is for $17 500.00.
• C)the contract is for $14 500.00.
• D)there is no contract at all.
• E)the contract is for $16 000.00.

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Definitions:

Concentrated Industry

An industry characterized by a small number of large firms that have a significant market share, leading to reduced competition.

Herfindahl-Hirschman Index

A measure used to assess the level of competition within an industry, calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers.

Industry Y

This term is not specific; however, it typically refers to a hypothetical or specific sector within the economy during discussions or analyses.

Concentration Ratio

A metric used to assess the degree of market concentration by measuring the market share of the largest firms within an industry.