A Group of 9 Consumers Are Trying to Decide Whether

question 18

Multiple Choice

A group of 9 consumers are trying to decide whether to connect to a new communications network.Consumer 1 is of type 1, consumer 2 of type 2, consumer 3 of type 3, and so on.Each consumer's willingness to pay to belong to the network is proportional to the number of consumers who belong.Where k is the number of consumers who belong, the willingness to pay of a type n consumer is equal to k times n.What is the highest price at which 7 consumers could all connect to the network and either make a profit or at least break even?

• A)$23
• B)$19
• C)$18
• D)$26
• E)$21

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Definitions:

Simultaneous Game

A strategic situation where all players make their decisions or choose their actions at the same time.

Pricing Games

Strategic maneuvers or tactics used by companies to set prices in a way that maximizes profit or market share, often considering the actions of competitors.

Allocatively Inefficient

A situation where resources are not allocated in a way that maximizes the total benefits to society, often leading to overproduction or underproduction of certain goods.

Productively Inefficient

A situation in which a producer cannot produce a desired output at the lowest possible cost, indicating a waste of resources.