A Seller Decides to Sell an Object by Means of a Sealed-Bid

question 1

Multiple Choice

A seller decides to sell an object by means of a sealed-bid second-price auction without a reservation price. There are two bidders. The seller believes that for each of the two bidders there is a probability of that the bidder's value for the object is $400 and a probability of that the bidder's value is $300. The seller believes that these probabilities are independent between bidders. If the bidders bid rationally, what is the seller's expected revenue from the auction?

• A) $325
• B) $400
• C) $350
• D) $320
• E) $340

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Definitions:

Pesticide Residues

The traces of chemicals left on or in crops and food products after pesticide application, which can have health implications.

Food Quality Protection Act

A 1996 federal law that set pesticide limits in food, & all active and inactive ingredients must meet safety standards for infants and children.

Toxic Substances Control Act

U.S. legislation enacted to regulate the introduction of new or already existing chemicals, with the aim of protecting human health and the environment.

Unreasonable Risk

A situation or action that exposes individuals to a significant potential for harm that is not justified by the possible benefits.