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erica [24]
3 years ago
7

Dan owns an autographed copy of a brittany spears cd that he values at $100. if he sells the cd at the garage sale he's planning

to hold in a few weeks, it will be sold to a buyer with a reservation price of $175. if he sells it on ebay, it will be sold to a buyer with a reservation price of $500. ebay will charge dan $50 to auction the cd, which just covers ebay's opportunity cost of running the auction. relative to selling the cd at his garage sale, auctioning the cd on ebay will lead:
Business
1 answer:
Delvig [45]3 years ago
8 0

The complete question is as follows:

Dan owns an autographed copy of a Brittany Spears CD that he values at $100. If he sells the CD at the garage sale he’s planning to hold in a few weeks, it will be sold to a buyer with a reservation price of $175. If he sells it on eBay, it will be sold to a buyer with a reservation price of $500. eBay will charge Dan $50 to auction the CD, which just covers eBay’s opportunity cost of running the auction. Relative to selling the CD at his garage sale, auctioning the CD on eBay will lead:

A. to no change in total economic surplus.

B. total economic surplus to increase by $500.

C. total economic surplus to increase by $275.

D. total economic surplus to increase by $100.

Answer: C - Total economic surplus to increase by $275.

In this question, we only need to consider producers' surplus since we're considering the various options for Dan to sell his CD.

We calculate Producer's Surplus as follows:

Producer's surplus = Market Selling Price - Economic Cost.

Economic costs not only refers to explicit costs like cost of the CD, but also includes opportunity costs. Since we need to calculate producer's surplus when Dan sells on Ebay, we need to consider the following costs:

Value of the CD = $100

Ebay's opportunity cost that Dan will have to bear = $50

Profit Dan would've received in garage sale = $75 ($175 - $100)

Among the three expenses listed above, the profit Dan would've got in the garage sale is considered the <u>implicit cost or opportunity cost.</u>

Substituting the values we have in the equation above, we get,

Producer's Surplus = 500 - (100+50+75)

Producer's Surplus = 275

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According to this graph, at $10 the quantity supplied is about 14.

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Answer:

$73,070.5

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Inflation erodes the value of money. It makes more quantity of money to required to buy the same basket of food and services in the future.

With inflation, to calculate the the quantity of Dollars needed in n years time, we use the formula;

Inflated amount = h × (1 + f)^n

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So if Farrell needs $400,000 in 6 years time in real terms, with an inflation of 5% per year, he would need to have a quantity of money equal to

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To provide for $536,038.3  in 6 years time, he would need to contribute into a sinking fund on a yearly basis, an equal amount denoted as "A" in the formula below:

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536,038.3 = A × ((1+0.08 )^(6) - 1)/0.08)

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$73,070.5

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