The following table displays the reservation values of eight buyers and eight sellers, who each want to buy or sell a calculator. You are in charge of deciding which buyer trades (or not) with which seller at what price as you see fit. You could prescribe different prices to each pair of a buyer and a seller.

-Refer to the table above.Suppose you decided that Buyer 1 and Seller 1 trade at the price that is exactly halfway between their reservation values.Also Buyer 2 and Seller 2,Buyer 3 and Seller 3,Buyer 4 and Seller 4,and Buyer 5 and Seller 5 do the same.The outcome will be ________.Buyer ________ has the largest net benefit of ________.Buyer ________ has the smallest net benefit of ________.
A) efficient; 1; $9; 5; $0
B) efficient; 1; $18; 5; $0
C) efficient; 1; $18; 5; $12
D) inefficient; 1; $12; 5; $12

Question

The following table displays the reservation values of eight buyers and eight sellers, who each want to buy or sell a calculator. You are in charge of deciding which buyer trades (or not) with which seller at what price as you see fit. You could prescribe different prices to each pair of a buyer and a seller.
 
-Refer to the table above.Suppose you decided that Buyer 1 and Seller 1 trade at the price that is exactly halfway between their reservation values.Also Buyer 2 and Seller 2,Buyer 3 and Seller 3,Buyer 4 and Seller 4,and Buyer 5 and Seller 5 do the same.The outcome will be ________.Buyer ________ has the largest net benefit of ________.Buyer ________ has the smallest net benefit of ________.
A) efficient; 1; $9; 5; $0 
B) efficient; 1; $18; 5; $0 
C) efficient; 1; $18; 5; $12 
D) inefficient; 1; $12; 5; $12

Quizplus · Accepted Answer

By assigning trades at the price halfway between each buyer and seller's reservation value, we achieve an efficient outcome. This means that all trades that can occur, will occur, and no one who wants to trade at this price will be left out. 
Buyer 1 has the largest net benefit because they were willing to pay $10 for a calculator and only had to pay $1, resulting in a net benefit of $9. 
Buyer 5 has the smallest net benefit because they were willing to pay the same amount ($1) as the seller's reservation value and therefore only achieved a net benefit of $0.

The Following Table Displays the Reservation Values of Eight Buyers