The Table Above Lists the Independent Private Values of Five

question 97

Multiple Choice

The table above lists the independent private values of five participants in an auction. Each of the bidders only knows their o value and does not know the private values of the other participants.
-Refer to the table above. Recall that the bidders only know their own private value of the item and they do not know the other participants' private values. Further, assume each participant will submit bids using their optimal strategy. If the participants are bidding in a sealed- bid first- price auction, Bidder ________ wins the auction and pays ________ .

• A)#5; 9.5 million
• B)#5; a value less than $10 million and greater than $9.5 million
• C)#3; a value less than $10 million and greater than $9.5 million
• D)#3; $10 million

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Definitions:

Actual Production

The total quantity of goods and services produced by an economy or firm at any given time, reflecting real output.

Diagram

A simplified drawing showing the appearance, structure, or workings of something; a schematic representation.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; every good or service is produced up to the point where the last unit provides a benefit to consumers equal to the cost of producing it.

Producer Surplus

The variance between the price producers are willing to take for a good or service and the price they end up receiving.