You hold an auction on ebay and expect two bidders to show up. you estimate that each bidder has a value of either $5 or $8 for the item, and you attach probabilities to each value of 50%. your own value for the item is zero. you can set a reserve price, a price below which you will not accept bids for the item (or the price at which the auction starts). what reserve price should you set, and what is your expected revenue from auctioning the item with a reserve price?
the answer to the question is (b) economists are sharply divided into competing schools of thought with little overlap of ideas and beliefs.
interestingly, as a field, economics does not have many school of thoughts that directly competes with one another – most of them share some similar concepts – just a different way of executing them. some examples of school of thoughts in economics include marxian economics and neoclassical economics.
a severance package is a package of pay and benefits offered to employees when they leave an organization, not by choice. these packages are used to pay salary and benefits to give the let go emplooyee time to retire or find a new job. if an investor saw that there was a $40 million dollar severance package out for someone that was let go from an organization it could strike a red flag for profits. this may also raise concern about how the organization is doing in terms of finances and what happened with that employee.