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.What percentage of the cost of bribing can the seller pass on to the buyers? (Hint: The bribe is just like a tax.)

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.What percentage of the cost of bribing can the seller pass on to the buyers? (Hint: The bribe is just like a tax.)

Quizplus · Accepted Answer

The Answer of 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.What percentage of the cost of bribing can the seller pass on to the buyers? (Hint: The bribe is just like a tax.)

Scenario: the Table Below Shows the Reservation Values of Ten