The reservation value of a seller reflects her ________.
A) willingness to pay for using a resource
B) marginal cost
C) marginal revenue
D) total cost

Question

Quizplus · Accepted Answer

The reservation value of a seller reflects the lowest price at which they are willing to sell or the minimum amount they would accept to part with their resource. This means that it corresponds to the seller's marginal cost, which is the additional cost incurred to produce an additional unit of output. Option A is incorrect because the reservation value is not about the seller's willingness to pay for using a resource but rather the price at which they are willing to let go of a resource. Option C is incorrect because the reservation value does not reflect the seller's marginal revenue, which is the additional revenue earned from the sale of an additional unit of output. Option D is also incorrect because the reservation value is not related to the seller's total cost, which includes both fixed and variable costs.

The Reservation Value of a Seller Reflects Her ________