Question
1. In a market, there are 8 buyers, each demanding a single discrete unit. Their incremental valuations are v(1) = 20, v(2) = 18, v(3) = v(4) = v(5) = v(6) = 15, v(7) = v(8) = 12. There are 5 sellers, each offering a single discrete unit. Their incremental costs are all equal to MC = 10. (a) What is the Bohm-Bawerk marginal pair in this market? (b) Without the presence of buyer 6, what is the Bohm-Bawerk marginal pair and the corresponding equilibrium price range? (c) Is this market necessarily perfectly competitive in the sense of Ostroy? (d) Consider the economy without buyer 6. In this case, what is the shadow price of the maximum capacity Q = 5?
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