Suppose There Are Three Identical Vases Available to Be Purchased

question 2

Multiple Choice

Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay R300 for one, buyer 2 is willing to pay R250 for one, and buyer 3 is willing to pay R200 for one. If the price is R250, how many vases will be sold and what is the value of consumer surplus in this market?

• A) Three vases will be sold and consumer surplus is R800.
• B) One vase will be sold and consumer surplus is R50.
• C) One vase will be sold and consumer surplus is R300.
• D) Three vases will be sold and consumer surplus is R0.
• E) Two vases will be sold and consumer surplus is R50.

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Definitions:

Convertible Bonds

Debt securities that can be converted into a predetermined number of the issuing company's shares, usually at the bondholder's option.

Bullwhip Effect

A phenomenon where small fluctuations in demand at the retail level cause progressively larger fluctuations in demand at the wholesale, distributor, and manufacturer levels.

Retailers

Businesses that sell goods or commodities directly to consumers.

Wholesalers

Businesses that buy goods in large quantities from manufacturers and sell them in smaller quantities to retailers or other businesses.