Carlos is risk-neutral and has an ancient farmhouse with great character for sale in Slaterville Springs. His reservation price for the house is $130,000. The only possible local buyer is Whitney, whose reservation price for the house is

$150,000. The only other houses on the market are modern ranch houses that sell for $125,000, which is exactly equal to each potential buyer’s reservation price for such a house. Suppose that if Carlos does not hire a Realtor, Whitney will learn from her neighbor that Carlos’s house is for sale and will buy it for

$140,000. However, if Carlos hires a Realtor, he knows that the Realtor will put him in touch with an enthusiast for old farmhouses who is willing to pay up to $300,000 for the house. Carlos also knows that if he and this person negotiate, they will agree on a price of $250,000. If Realtors charge a commission of 5 percent of the selling price and all Realtors have opportunity costs of

$2,000 for negotiating a sale, will Carlos hire a Realtor? If so, how will total economic surplus be affected? LO1MK