1. A new bank offers a special promotion where patrons in the first 3 hours of o
ID: 454782 • Letter: 1
Question
1. A new bank offers a special promotion where patrons in the first 3 hours of operation were able to purchase a $100 bill for only $50. Before the branch opened its doors, a line up had formed. Suppose, for the sake of argument, everyone in the line has a time cost equal to $10 per hour. Suppose also that each customer can only purchase one bill, and that the bank has a limit of 200 bills to sell. Finally, suppose the bank can sell the bills instantly once the doors open.
i. What will the line look like? That is, when do people form the line and how many people are standing there?
ii. Suppose there was no limit to how many bills a customer could purchase. That is, one person could buy all 200 bills that are for sale. How many people would be in the line and how long would the line be in terms of time.
iii. Is waiting in line a transaction cost?
Explanation / Answer
1. People formed the line before the branch started it's operations.It is not certain to give a fixed number how many people are standing outside, based on the no. of forms, there could be 200 persons standing and waiting outside.
2. Bank could accomodate 200 people in the line, since that is the maximum permissible limit for the forms.
3. Yes, the time spent searching for a product or waiting in line, are called transaction costs.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.