Suppose that, at an auction, there are four lawn mowers-two with a quality rating of 4 and two with a quality rating of 1. The scale runs from 1 to 4, with 1 being worst and 4 being near-mint condition. Sellers know the quality rating of their lawn mower and value it at 100Q, where Q is the quality rating. Buyers do not know the quality rating of any specific lawn mower, but assume here that buyers know the average quality rating of all the lawn mowers being offered for sale. Buyers value lawn mowers at 150Q, where Q is the average quality rating of lawn mowers being offered for sale at the current auction price. Which of the following statements is (are) TRUE? I. At an auction price of $500 each, all four sellers are willing to sell their lawn mowers but will be unsuccessful. II. At an auction price of $300 each, two sellers are willing to sell their 1-quality-rated lawn mowers, but buyers are only willing to pay $150. III. At an auction price of $120 each, two 1-quality-rated lawn mowers will be sold. O I and II O I, II, and III O I and III JII

Suppose that, at an auction, there are four lawn mowers-two with a quality rating of 4 and two with a quality rating of 1. The scale runs from 1 to 4, with 1 being worst and 4 being near-mint condition. Sellers know the quality rating of their lawn mower and value it at 100Q, where Q is the quality rating. Buyers do not know the quality rating of any specific lawn mower, but assume here that buyers know the average quality rating of all the lawn mowers being offered for sale. Buyers value lawn mowers at 150Q, where Q is the average quality rating of lawn mowers being offered for sale at the current auction price. Which of the following statements is (are) TRUE? I. At an auction price of $500 each, all four sellers are willing to sell their lawn mowers but will be unsuccessful. II. At an auction price of $300 each, two sellers are willing to sell their 1-quality-rated lawn mowers, but buyers are only willing to pay $150. III. At an auction price of $120 each, two 1-quality-rated lawn mowers will be sold. O I and II O I, II, and III O I and III JII

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter15A: Auction Design And Information Economics

Section: Chapter Questions

Problem 5E

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