A Bidders' Value for a Good May Be Low ($2),medium

question 20

Multiple Choice

A bidders' value for a good may be low ($2) ,medium ($5) ,or high ($7) .There are an equal number of potential bidders having each value.Suppose two bidders show up for an auction at which the good is offered.What is the best estimate of the expected revenue from the auction assuming there is no minimum bid increment?

• A)$4.11
• B)$3.99
• C)$3.56
• D)$5.00

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Definitions:

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and treats fixed overhead as a period expense.

Activity Base

A measure used to assign costs in activity-based costing, reflecting the volume of activity that drives costs.

Service Firm

A business that provides intangible products or services to consumers or other businesses.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, contributing to covering fixed costs and generating profit.