Use the following information in answering questions 1 - 9. Assume persons of type 1 value quality level z and the product itself such that the reservation price for one unit is 10 + z. Similarly, for a person of type 2 the reservation price is 9 + 3z. The cost of producing the product is 6 + 2z. Assume that z can be equal to 0 or 1. Assume seller A sells only the low quality z = 0 good, and seller B sells only the high quality z = 1 good. Assume there are two persons of each type. 1. When seller A charge price 10 and seller B charges a price of 12, seller B will earn profit = а) 10 b) 9 c) 12 d) 8 e) 6

Use the following information in answering questions 1 - 9. Assume persons of type 1 value quality level z and the product itself such that the reservation price for one unit is 10 + z. Similarly, for a person of type 2 the reservation price is 9 + 3z. The cost of producing the product is 6 + 2z. Assume that z can be equal to 0 or 1. Assume seller A sells only the low quality z = 0 good, and seller B sells only the high quality z = 1 good. Assume there are two persons of each type. 1. When seller A charge price 10 and seller B charges a price of 12, seller B will earn profit = а) 10 b) 9 c) 12 d) 8 e) 6

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter18: Asymmetric Information

Section: Chapter Questions

Problem 18.7P

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