1. Price as a rationing device

Suppose that there are three beachfront parcels of land available for sale in Huntington,

and six people who would each like to purchase one parcel. Assume that the parcels are

essentially identical and that the minimum selling price of each is $575,000. The

following table states each person's willingness and ability to purchase a parcel.

Willingness and Ability to Purchase

(Dollars)

Brian 750,000

Crystal 660,000

Edison 600,000

Hilary 550,000

Kevin 520,000

Maria 510,000

Which of these people will buy one of the three beachfront parcels? Check all that apply.

Brian

Crystal

Edison

Hilary

Kevin

Maria

Points:

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Close Explanation

Explanation:

Brian, Crystal, and Edison will purchase the parcels because they are the only ones willing and

able to meet the minimum selling price of $575,000. One or more of the other three people

might have the ability but not the willingness to pay the required price. Moreover, perhaps

Hilary, Kevin, and Maria have a strong desire to own beachfront land in Huntington, but they

do not have the ability to pay the selling price.

Assume that the three beachfront parcels are sold to the people that you indicated in the

previous section. Suppose that a few days after the last of those beachfront parcels is sold,

another essentially identical beachfront parcel becomes available for sale at a minimum price

of $535,000. This fourth parcel will

be sold because Hilary

will purchase it from the seller for at least the minimum price.

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Points:

1 / 1

Close Explanation

Explanation:

To determine what will happen with the fourth parcel, compare the minimum selling price with

the willingness and ability to pay of the remaining buyers. The remaining buyer with the

highest willingness and ability to pay is Hilary at $550,000. Since $550,000 is greater than the

minimum selling price of $535,000 for this parcel, Hilary will purchase the parcel.

1. Price as a rationing device

Suppose that there are three beachfront parcels of land available for sale in Huntington, and

six people who would each like to purchase one parcel. Assume that the parcels are essentially

identical and that the minimum selling price of each is $745,000. The following table states

each person's willingness and ability to purchase a parcel.

Willingness and Ability to Purchase

(Dollars)

Felix 900,000

Janet 810,000

Larry 770,000

Megan 720,000

Raphael 690,000

Susan 680,000

Which of these people will buy one of the three beachfront parcels? Check all that apply.

Felix

Janet

Larry

Megan

Raphael

Susan

Points:

1 / 1

Close Explanation

Explanation:

Felix, Janet, and Larry will purchase the parcels because they are the only ones willing and

able to meet the minimum selling price of $745,000. One or more of the other three people

might have the ability but not the willingness to pay the required price. Moreover, perhaps

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Megan, Raphael, and Susan have a strong desire to own beachfront land in Huntington, but

they do not have the ability to pay the selling price.

Assume that the three beachfront parcels are sold to the people that you indicated in the

previous section. Suppose that a few days after the last of those beachfront parcels is sold,

another essentially identical beachfront parcel becomes available for sale at a minimum price

of $732,500. This fourth parcel will not

be sold because no one

will purchase it from the seller for at least the minimum price.

Points:

1 / 1

Close Explanation

Explanation:

To determine what will happen with the fourth parcel, compare the minimum selling price with

the willingness and ability to pay of the remaining buyers. The remaining buyer with the

highest willingness and ability to pay is Megan at $720,000. However, since $720,000 is less

than the minimum selling price of $732,500 for this parcel, no one will purchase the parcel.

The seller will have to lower his minimum selling price if he wants to find a buyer.

2. Price controls in the Florida orange market

The following graph shows the annual market for Florida oranges, which are sold in units of

90-pound boxes.

Use the graph input tool to help you answer the following questions. You will not be graded on

any changes you make to this graph.

Note: Once you enter a value in a white field, the graph and any corresponding amounts in

each grey field will change accordingly.

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