7th attempt See Hint In Chapter 1, you learned that buying and selling textbooks
ID: 1151951 • Letter: 7
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7th attempt See Hint In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold Think about your decision to buy the textbook for this course. You paid $225 for the book, but you would have been willing to pay $450 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $70 to you. The bookstore will pay you 50% of the original $225. 849 Tues How much total value have you gained? VIEW SOLUTIONSUBMIT ANS K 10/19>Explanation / Answer
Calculate the value created when textbook was bought -
Maximum willingness to pay for textbook = $450
Price of the textbook = $225
Value created = maximum willingness to pay for textbook - price of the textbook = $450 - $225 = $225
The value created when textbook was bought is $225
Calculate the value created when textbook is sold -
Minimum acceptable price = $70
Actual sale price = 50% of $225 = 0.50 * 225 = 112.50
Value created = Actual sale price - Minimum acceptable price = $112.50 - $70 = $42.50
The value created when book is sold is $42.50
Calculate the total value gained -
Total value gained = Value created when textbook is bought + Value created when textbook is sold
Total value gained = $225 + $42.50 = $267.50
Thus,
The total value gained is $267.50
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