In bargaining between a bureau and the legislature over a budget,the legislature decides to purchase a certain amount of output at certain price and negotiates both simultaneously.This gives the bureau the opportunity to _____.

Question

Quizplus · Accepted Answer

When the legislature decides to purchase a certain amount of output at a certain price, it creates a situation where the bureau has market power and can extract consumer surplus from the legislature. Therefore, the best choice is B, which states that the bureau can extract all the legislature's consumer surplus from the bureau's output.

In Bargaining Between a Bureau and the Legislature Over a Budget,the