Answer to Question #233950 in Finance for Lee

Question

Question 1
Mary is having a yard sale and is willing to sell a painting if she gets at least $2, buts she has not marked a price on it. John is at her sale and willing to pay up to $100 for this painting. What can economic theory tell us about the price that will result? Choose the ONE most correct answer and provide a reason for your answer. (2)
A. It will be $51, half way between the values that Mary and John place on the painting.
B. There will be no sale because these two values are too far apart.
C. If there is a sale, the price will be somewhere between $2 and $100.
D. Nothing; economic theory can only explain markets with many buyers and many sellers

Answer 1

B. There will be no sale because these two values are too far apart.

For sale to occur the values must be very close.