This problem takes you through the results of an experiment like yours, in which students are buying and selling used textbooks. In the first variation of the experiment, the buyers paid a tax of $4.
Here are the values for the willingness to pay for buyers and reservation price for sellers.
Buyer Buyer Value Seller Seller Cost
1 $16.00 1 $4.00
2 $15.50 2 $4.50
3 $15.00 3 $5.00
4 $14.00 4 $6.00
5 $13.50 5 $6.50
6 $13.00 6 $7.00
7 $12.50 7 $7.50
8 $12.00 8 $8.00
9 $11.00 9 $9.00
10 $10.50 10 $9.50
11 $10.00 11 $10.00
12 $9.50 12 $10.50
1.1. If the price is $10, how many buyers will be willing to buy? That is, how many buyers have a buyer value that is greater than or equal to the $14 cost of a textbook--$10 to the seller and $4 in tax? (As always, unless stated otherwise, we are following the convention that traders who are indifferent about trading at a price go ahead and trade, so someone with a buyer value equal to $14 will buy.)
Please enter a whole number, with no decimal point.
1.2. How many sellers will be willing to sell at a price of $10? That is, how many sellers have a seller cost that is less than or equal to $10?
Please enter a whole number, with no decimal point.
1.3. In the previous two questions, you learned that when buyers pay the $4 tax and the price is $10, there are more sellers than buyers. To clear this market, the equilibrium price will have to be:
A. Less than $10
B. More than $10
C. Equal to $10
1.4. What is the equilibrium price that buyers pay to sellers? That is, at what price will the number of willing buyers be equal to the number of willing sellers? (Remember that buyers also have to pay the $4 tax to the government.)
$
Please enter a whole number, with no decimal point.
1.5. Suppose that buyer 9 (with a buyer value of $11) and seller 9 (with a seller cost of $9) meet and realize that the textbook is worth more to buyer 9 than to seller 9. If buyer 9 has to pay the $4 tax on any transaction between the two of them, can they agree to a trade that makes both of them better off?
A. Yes
B. No
Answers: 3
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