Question : Four friends—Tom, Bill, Jeff and Roger—are participating in an English : 1377580

Four friends—Tom, Bill, Jeff and Roger—are participating in an English auction. Tom values the good being auctioned at $500, Bill values it at $210, Jeff values it at $350, and Roger values it at $625.

21) Refer to the scenario above. If they are the only bidders in the auction, Jeff will win the auction if ________.

A) Tom and Roger bid up to their value for the good while Bill and Jeff bid below their value of the good

B) Tom and Jeff bid up to their value for the good while Roger and Bill bid below their value for the good

C) Bill and Jeff bid up to their value for the good while Tom and Roger stop bidding at $100 and $200 respectively

D) each of them bids up to his value for the good

22) Refer to the scenario above. If they are the only bidders in the auction and each bidder uses his optimal strategy, the maximum price the winner is likely to pay is ________.

A) $210

B) $350

C) $500

D) $625

23) Refer to the scenario above. If they are the only bidders in the auction and each bidder bids up to his value for the good, the winner will earn a surplus of ________.

A) $500

B) $625

C) $125

D) $150

24) Refer to the scenario above. Which of the following is true in this case?

A) There is no Nash equilibrium.

B) There is no dominant strategy equilibrium.

C) The dominant strategy equilibrium is the Nash equilibrium.

D) The dominant strategy equilibrium is not the Nash equilibrium.

25) Refer to the scenario above. In this case, Nash equilibrium occurs if ________.

A) each of them bids up to their value for the good

B) Tom and Roger bid up to their value for the good while Bill and Jeff bid below their value for the good

C) Tom and Jeff bid up to their value for the good while Roger and Bill bid below their value for the good

D) Bill and Jeff bid up to their value for the good while Tom and Roger stop bidding at $100 and $200 respectively

26) Refer to the scenario above. If these four friends are the only bidders and each bidder uses his optimal strategies, the auctioneer will earn an expected revenue of ________.

A) $210

B) $350

C) $500

D) $625

An ancient painting is being auctioned off in an open-outcry English auction. The following table shows the maximum willingness to pay of each bidder.

Bidders

Values (in dollars)

Rachel

500

James

450

David

400

Joe

350

Emily

300

Bob

250

27) Refer to the scenario above. Which of the following statements will hold true if the starting bid is $300?

A) Everyone except Bob will take part in the auction.

B) Everyone will take part in the auction.

C) Only Bob will take part in the auction.

D) Everyone except Joe will take part in the auction.

28) Refer to the scenario above. The optimal strategy for Rachel is to bid a price:

A) above her willingness to pay.

B) equal to half the amount she is willing to pay.

C) equal to 5/6 times her willingness to pay.

D) up to her willingness to pay.

29) Refer to the scenario above. If the starting bid is $250, ________ will win the auction and will have to pay ________ for the painting.

A) Bob; $250

B) James; $400

C) Rachel; $450

D) Joe; $400

30) Refer to the scenario above. The winner of this auction will earn a consumer surplus of ________.

A) $450

B) $50

C) $150

D) $100

31) Refer to the scenario above. Which of the following is true if David’s maximum willingness to pay for the good falls to $380?

A) James will win the auction.

B) Rachel will not take part in the auction.

C) The auctioneer will earn the same average revenue.

D) David will win the auction.