Author Question: Why was a fixed price of 50 not the best way of allocating used laptops? Suggest other possible ways ... (Read 84 times)

mia · **on:** Jun 29, 2018

Why was a fixed price of 50 not the best way of allocating used laptops? Suggest other possible ways of distributing the laptops that would be efficient.

What will be an ideal response?

Question 2

What is an imperfectly competitive industry?

What will be an ideal response?

bfulkerson77 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

At the price of 50, the quantity of laptops demanded far exceeded the quantity supplied. This excess demand led to long queues and a stampede at the Richmond International Raceway. One of the other ways of allocating the laptops would have been to use flexible prices. Those who valued the laptops the most would have paid the most for them. An auction would have raised revenue and allocated the laptops better than a fixed price. Henrico County could also have used a random lottery to allocate the used laptops. Those who got the laptops through the lottery could have then sold it to anyone who valued them more than they did. The lottery would not, however, lead to an efficient outcome if people who won the lottery were not allowed to sell the laptops.

Answer to Question 2

An imperfectly competitive industry is an industry in which single firms have some control over the price of their output.