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5 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.
5 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 10 farmhouses who is willing to pay up to $200,000 for the house. Carlos also knows that if he and this person negotiate, they will agree on a price of $150,000. points 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? eBook Yes |, Carlos will hire a realtor. Print How will total economic surplus be affected? Instructions: Enter your responses as whole numbers. References Total economic surplus without the realtor: $ Total economic surplus with the realtor (including the realtor's surplus): $
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