posted by Dalia on .
a.in an auction, potential buyers compete for a good by submitting bids. adam compared ebay auctions in which the same good was sold. he founf that,on average, the larger the number of bidders, the higher the sales price. for example, in two auctions of identical ipods, the one with the lrger number of bidders brought a higher selling price. according to adam, this explain why smart sellers on ebay set absurdly low opening prices(the lowest price that the seller will accept), such as 1 cent for a new ipod. use the concepts of consumer and producer surplus to explain adam's reasoning.
b. you are considering selling your vintage 1969 convertible volkswagen beetle. if the car is in good condition, it is worth a lot; if it is in poor condition, it is useful only as scrap. assume that your car is in excellent condition but that it costs a potential buyer $500 for an inspection to learn the car's condition. use what you learned in part a to explain whether ot not you should pay for an inspection and share the results with all interested buyers.