Scenario: The table below shows the reservation values of ten buyers and a seller for a loaf of bread. Each buyer would buy at most one loaf and the seller can make up to ten loaves. Initially trades happen under the market mechanism with each agent making a decision according to the market price and his or her own reservation value. Then the government imposes a price ceiling of $1.00 per unit.

-Refer to the scenario above.Suppose that,after the price ceiling is imposed,the government inspector extorts a bribe of $1.00 per loaf from the seller,so the seller can sell each loaf at the market price while the inspector looks the other way.Which of the following is a consequence of the bribe taking?

Question

Scenario: The table below shows the reservation values of ten buyers and a seller for a loaf of bread. Each buyer would buy at most one loaf and the seller can make up to ten loaves. Initially trades happen under the market mechanism with each agent making a decision according to the market price and his or her own reservation value. Then the government imposes a price ceiling of $1.00 per unit.
 
-Refer to the scenario above.Suppose that,after the price ceiling is imposed,the government inspector extorts a bribe of $1.00 per loaf from the seller,so the seller can sell each loaf at the market price while the inspector looks the other way.Which of the following is a consequence of the bribe taking?

Quizplus · Accepted Answer

The bribe allows the seller to sell at the market price, effectively circumventing the price ceiling. This means the market can reach equilibrium, avoiding deadweight loss. However, the inspector's bribe of $1.00 per loaf, assuming 5 loaves are sold (as implied by the $5.00 total), represents a transfer of wealth from the seller to the inspector, not a loss of efficiency in the market.

Scenario: the Table Below Shows the Reservation Values of Ten