Isabella is participating in a first-price sealed-bid auction for ...

[sabina]

Isabella is participating in a first-price sealed-bid auction for a house. If there are 5 other bidders and her maximum willingness to pay for the house is 60,000, what is her optimal bidding strategy?
 
  What will be an ideal response?

Question 2

Jerry is studying three nights per week and his grade point average is 3.1. He wants a higher GPA and decides to study an extra night each week. His GPA now rises to 3.5.
 
  Had Jerry not decided to study an extra night, he would have spent this night with his friends. What is Jerry's marginal benefit from studying for one additional night a week? What is his marginal cost of increasing the study time by one night per week? Why does Jerry decide to study an extra night?

[tdewitt]

Answer to Question 1

In a first-price sealed-bid auction, each bidder should place a bid below his maximum willingness to pay for the good. The exact value of the optimal bid depends on the number of bidders. In this case, the number of bidders is 6. Therefore, Isabella should place a bid of (5/6 )  60,000 = 50,000.

Answer to Question 2

Marginal benefit is the benefit that arises from an increase in an activity. Jerry's marginal benefit is the 0.4 increase in his grade. Marginal cost is the opportunity cost of an increase in an activity. Jerry's marginal cost is a night spent with his friends that he gives u

[sabina]

Thank you

[tdewitt]

Happy to help you