Auctioneers in the state of Nebraska need to get a license from the State in order to operate. Suppose the license has a one-time fee of $50,000. Once the license is granted, the state of Nebraska allows the auctioneer to sell the license to others at any price. But, if the auctioneer wants to, the auctioneer can give up his/her license AT ANY TIME and get a $40,000 refund from the state of Nebraska. Samantha recently paid $50,000 for the auctioneer’s license but is having second thoughts. So, she spends $5,000 on advertising hoping to get $42,500 for the license. Using all of the information above, what is Samantha’s sunk costs? Using ONLY the ABOVE INFORMATION. Assuming that Samantha has not sold the license yet , do you think the Samantha made a wise move to spend $5,000 on advertising hoping to get $42,500 for the license? Explain why or why not? After a very long wait, suppose Samantha gets an offer of $41,500 for the license. 3. Should Samantha accept the offer? Why or Why not? Explain.
Auctioneers in the state of Nebraska need to get a license from the State in order to operate. Suppose the license has a one-time fee of $50,000. Once the license is granted, the state of Nebraska allows the auctioneer to sell the license to others at any price. But, if the auctioneer wants to, the auctioneer can give up his/her license AT ANY TIME and get a $40,000 refund from the state of Nebraska. Samantha recently paid $50,000 for the auctioneer’s license but is having second thoughts. So, she spends $5,000 on advertising hoping to get $42,500 for the license. Using all of the information above, what is Samantha’s sunk costs? Using ONLY the ABOVE INFORMATION. Assuming that Samantha has not sold the license yet , do you think the Samantha made a wise move to spend $5,000 on advertising hoping to get $42,500 for the license? Explain why or why not? After a very long wait, suppose Samantha gets an offer of $41,500 for the license. 3. Should Samantha accept the offer? Why or Why not? Explain.
Chapter25: Monopoly
Section: Chapter Questions
Problem 13E
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Auctioneers in the state of Nebraska need to get a license from the State in order to operate. Suppose the license has a one-time fee of $50,000. Once the license is granted, the state of Nebraska allows the auctioneer to sell the license to others at any price. But, if the auctioneer wants to, the auctioneer can give up his/her license AT ANY TIME and get a $40,000 refund from the state of Nebraska.
Samantha recently paid $50,000 for the auctioneer’s license but is having second thoughts. So, she spends $5,000 on advertising hoping to get $42,500 for the license.
- Using all of the information above, what is Samantha’s sunk costs?
- Using ONLY the ABOVE INFORMATION. Assuming that Samantha has not sold the license yet , do you think the Samantha made a wise move to spend $5,000 on advertising hoping to get $42,500 for the license? Explain why or why not?
After a very long wait, suppose Samantha gets an offer of $41,500 for the license.
3. Should Samantha accept the offer? Why or Why not? Explain.
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