If You Are Willing to Sell Your Old Bicycle for $30

question 70

Multiple Choice

If you are willing to sell your old bicycle for $30, but someone offers you $40 for it, the results of the transaction would yield

• A) $10 worth of producer surplus and unknown consumer surplus.
• B) $10 worth of consumer surplus and unknown producer surplus.
• C) $30 worth of consumer surplus and $10 worth of producer surplus.
• D) $30 worth of producer surplus and $10 worth of consumer surplus.

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Definitions:

Interest

The cost of borrowing money or the return on investment for savings and investments, typically expressed as an annual percentage rate.

Risk Averse

Describing individuals or entities that prefer to avoid risk and would rather choose an alternative with a more certain but possibly lower return, than an option with a higher but uncertain return.

Utility Function

A mathematical representation that relates an individual’s consumption bundle to the level of satisfaction or utility derived from it.

Marginal Utility

The additional satisfaction or utility gained from consuming or using one more unit of a good or service.