Suppose you consider bidding at a government Tony Pizur @Regis Math

Question 56 / 60: Suppose you consider bidding at a government auction where the bids are sealed in envelopes with only one chance to bid. The winning bid gets the job and all others receive nothing. All bidders must pay a $50,000 bribe to participate. You intend to bid on a job at a price of $1 million, and you know that your cost to complete the job is $900,000. If the probability that you'll win is 25 percent, what is the rational course of action?

A Raise your bid to $1,050,000.

B Raise your bid between $1,000,000 and $1,050,000.

C Raise your bid above $1,050,000.

D Lower your bid to $950,000.

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Math for Economists ECON200

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Regis University

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Attribution: Tony Pizur. Math for Economists (The Saylor Academy 2014), http://www.saylor.org/courses/econ200/

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