Suppose There Are Four Boats Available at an Auction

question 40

Multiple Choice

Suppose there are four boats available at an auction. The sellers know the quality of their boats but the prospective buyers don't. The buyers know that two of the boats are high-quality and two of the boats are low-quality. Buyers value high-quality boats at $100,000 and low-quality boats at $60,000. Sellers value high-quality boats at $80,000 and low-quality boats at $40,000. If the auctioneer sets a price per boat at $50,000, how many boats and of which type will sellers make available?

• A) all four boats
• B) two high-quality boats
• C) two low-quality boats
• D) one high-quality and one low-quality boat

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Definitions:

Imported Good

A product or service brought into one country from another for sale, often subject to tariffs, quotas, or trade agreements.

Exported Good

A product or service produced in one country and sold to buyers in another, contributing to international trade.

Consumer Surplus

The benefit gained by consumers because they are able to purchase a product for a price less than the maximum price they would be willing to pay.

Tariff

A tax levied on imports.