Jane is interested in buying a car from a used car dealer. Her maximum willingness to pay for the car is $14 (thousand). Bo, the dealer, is willing to sell the car as long as he receives at least $8 (thousand). Thus, there is a potential surplus or gain from trade of $6 (thousand). Jane and the dealer bargain over the transaction price, p. If they cannot agree on a price, then the transaction does not occur, and neither party receives any surplus. If instead, Bo can only get $6 (thousand) elsewhere, then the price that maximizes the Nash product changes by $thousand. (Enter your response rounded to one decimal place and include a minus sign if necessary.)
Jane is interested in buying a car from a used car dealer. Her maximum willingness to pay for the car is $14 (thousand). Bo, the dealer, is willing to sell the car as long as he receives at least $8 (thousand). Thus, there is a potential surplus or gain from trade of $6 (thousand). Jane and the dealer bargain over the transaction price, p. If they cannot agree on a price, then the transaction does not occur, and neither party receives any surplus. If instead, Bo can only get $6 (thousand) elsewhere, then the price that maximizes the Nash product changes by $thousand. (Enter your response rounded to one decimal place and include a minus sign if necessary.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Jane is interested in buying a car from a used car dealer. Her maximum willingness to pay for the car is $14 (thousand). Bo, the dealer, is
willing to sell the car as long as he receives at least $8 (thousand). Thus, there is a potential surplus or gain from trade of $6 (thousand). Jane
and the dealer bargain over the transaction price, p. If they cannot agree on a price, then the transaction does not occur, and neither party
receives any surplus.
If instead, Bo can only get $6 (thousand) elsewhere, then the price that maximizes the Nash product changes by $thousand. (Enter your
response rounded to one decimal place and include a minus sign if necessary.)
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Nash Equilibrium: A Nash equilibrium refers to one in which no one can get better without making someone else worse off.
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