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Scenario: At the start of the quarter, 600 students are registered for Econ 1. They can buy a new book for $30, or they can buy a used book from a student who took Econ 1 last quarter. Used books can be nasty, however, with yellow marks and coffee stains. Half of the new students are frugal about their textbooks. To save money, they can put up with some marks and stains. The frugal students are only willing to pay a premium of $8 for a new book instead of a used book. The remaining 300 students are fastidious about their textbooks. Fastidious students are only willing to buy a used textbook if it is $20 cheaper than a new textbook.

There are also 600 students who took Econ 1 last quarter. A third of those students loved the course and plan to keep the book in their personal libraries. They would sell it only if they could get $27 or more. Another third of the students thought the professor was a babbling idiot. They would sell their book for as little as $3. The remaining one-third of students were lukewarm on the course. It was OK and maybe they'll be Econ majors, so it might be a good idea to hang onto the book. However, the Communication major is looking better and better. These students would be willing to sell their books for as little as $15. Let's refer to the first group of students as A students, the second groups as C students, and the third as B students.

How many used textbooks will fastidious students buy?

I thought the answer was 200 since there are only 200 willing to sell at $3, the only price that the fastidious students could handle (buyer value = $10).

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M9478786

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