There Are Five Risk-Neutral Bidders, Each Having a Private Value

question 1

Multiple Choice

There are five risk-neutral bidders, each having a private value that is independently drawn from the range $60 thousand to $120 thousand with all values in between equally likely. The respective expected revenues (in $ thousands) from the English and sealed-bid auctions are:

• A) E(P_E) = $100 and E(P_S) = $110.
• B) E(P_E) = E(P_S) = $96.
• C) E(P_E) = E(P_S) = $100.
• D) E(P_E) = $96 and E(P_S) = $108.
• E) E(P_E) = E(P_S) = $110.

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Definitions:

Factory Overhead Account

Represents all the indirect costs associated with running a production facility that are not directly tied to a specific product.

Overhead Allocation Base

A measure used to distribute overhead costs to various products or service units within a business.

Overhead Costs

Indirect expenses related to the operation of a business, such as utilities, rent, and administrative salaries, not directly tied to a specific product or service.

Predetermined Overhead Rate

An estimated charge per unit of activity used to allocate overhead costs to products or services, calculated before the costs are actually incurred.