The following table displays the reservation values of eight buyers and eight sellers, who each want to buy or sell a calculator. You are in charge of deciding which buyer trades (or not) with which seller at what price as you see fit. You could prescribe different prices to each pair of a buyer and a seller.

-Refer to the table above.To achieve efficiency,which group of buyers should trade with which group of sellers?
A) All buyers and all sellers should trade.
B) Buyers 5-8 and sellers 1-4 should trade.
C) Buyers 1-5 and sellers 1-5 should trade.
D) Buyers 1-4 and sellers 5-8 should trade .

Question

The following table displays the reservation values of eight buyers and eight sellers, who each want to buy or sell a calculator. You are in charge of deciding which buyer trades (or not) with which seller at what price as you see fit. You could prescribe different prices to each pair of a buyer and a seller.
 
-Refer to the table above.To achieve efficiency,which group of buyers should trade with which group of sellers?
A) All buyers and all sellers should trade. 
B) Buyers 5-8 and sellers 1-4 should trade. 
C) Buyers 1-5 and sellers 1-5 should trade. 
D) Buyers 1-4 and sellers 5-8 should trade .

Quizplus · Accepted Answer

Efficiency can be achieved when the buyers and sellers who have the closest reservation values trade with each other. In this case, buyers 1-5 and sellers 1-5 have reservation values that overlap. Therefore, they are the best choice to trade with each other to achieve efficiency. The remaining buyers and sellers either have very high reservation values or very low reservation values, which makes it difficult to find a mutually beneficial price. Therefore, they should not trade with each other to avoid inefficiency.

The Following Table Displays the Reservation Values of Eight Buyers