Question

If these four producers bid in an auction to supply one unit to a consumer, at what price will the good be sold?

Table 7-18 The following table shows the cost of producing a good for the only four producers in a market. Producer Cost W $40 X $30 $20 $10

Answer 1

Answer

the bid will be in descending order as it is bid from a producer and the bid will go to one person with the lowest cost but the bid price will be in the range of second last cost and the lowest cost.

here,

Z is the lowest cost bidder

Y is the second last lowest cost bidder

so, Z will get the bid and the price of the bid will be slightly less than the cost of Y

Price of the bid is less than $20 and greater than $10 but in general, it should be nearest to 20

Ex. It can be $19.5 or 19.9 or $19

as when X bid 19 then other producers can not bid as the price is less than costs

So, $10<price of the bid <$20