Scenario: the Table Below Shows the Reservation Values of Ten

question 175

Multiple Choice

Scenario: The table below shows the reservation values of ten buyers and a seller for a loaf of bread. Each buyer would buy at most one loaf and the seller can make up to ten loaves. Initially trades happen under the market mechanism with each agent making a decision according to the market price and his or her own reservation value. Then the government imposes a price ceiling of $1.00 per unit.

-Refer to scenario above.Suppose that,after the price ceiling is imposed,the seller serves customers on a first-come,first-served basis.This means that the seller's surplus depends on the order in which customers are served.What are the minimum and the maximum possible surpluses for the seller?

• A) Minimum $0, maximum $12.00
• B) Minimum $0.60, maximum $11.40
• C) Minimum $1.80, maximum $11.00.
• D) Minimum $2.75, maximum $9.25.

---

Definitions:

Operating Segment

A distinct component of a business engaged in activities generating revenues and incurring expenses, whose results are regularly reviewed by the entity's chief operating decision maker.

Revenue Test

A criterion used to evaluate whether an entity's revenue level meets specific thresholds for financial reporting or regulatory compliance purposes.

Operating Segments

Denotes the distinct revenue-producing components of an enterprise, which engage in business activities from which they may earn revenues and incur expenses.

Reportable

Referring to information or events that must be disclosed or reported according to regulatory, legal, or professional requirements.