Now suppose competition among several market makers forces the spread down to $4.How many goods are traded?

Question

Quizplus · Accepted Answer

The spread is the difference between the bid and ask prices. If the spread is $4, then the bid price is $100 and the ask price is $104. The number of goods traded is the difference between the ask price and the bid price, divided by the spread. In this case, the number of goods traded is (104 - 100) / 4 = 1.

Now Suppose Competition Among Several Market Makers Forces the Spread