Wilma offers $125, 000 for a house. The seller turns down the offer but says tha

Question

Wilma offers $125, 000 for a house. The seller turns down the offer but says that he will sell the house for $150,000. Wilma agrees to pay the higher price. Since we assume Wilma is a rational decision maker this must mean that:

a. the marginal benefit of the house to Wilma must be less than $150,000

b. the marginal benefit of the house to Wilma must be equal to or greater than $150,000

c. the marginal benefit of the house to the seller must be equal to or greater than $150,000

d. the marginal benefit of the house to the seller must be less than $125,000

Explanation / Answer

b. the marginal benefit of the house to Wilma must be equal to or greater than $150,000

That is why Wilma is ready to buy it at $150,000

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