Suppose you hired Maria, a real-estate agent, to help sell your house at the best possible price. As compensation, Maria will receive 3% of the selling price. Suppose Maria can sell the house in a few days by putting it on the market at $240,000, or she can advertise it for $260,000 and, after negotiating with prospective buyers, sell it for $250,000. The process of negotiation will take two weeks. If Maria chooses the $260,000 option, you gain an additional $10,000, while Maria's gain would be relatively small. If the house sells for $240,000, Maria receives 3% commission x $240,000 = $7,200. And if the house sells for $250,000, she gets 3% commission x $250,000 = $7,500. An extra $300 for the additional effort to attract the most suitable buyer appears to be a fairly weak incentive for Maria, considering that she could have moved on to the next commission rather than putting time and energy into selling your house. This is an example of

Suppose you hired Maria, a real-estate agent, to help sell your house at the best possible price. As compensation, Maria will receive 3% of the selling price. Suppose Maria can sell the house in a few days by putting it on the market at $240,000, or she can advertise it for $260,000 and, after negotiating with prospective buyers, sell it for $250,000. The process of negotiation will take two weeks. If Maria chooses the $260,000 option, you gain an additional $10,000, while Maria's gain would be relatively small. If the house sells for $240,000, Maria receives 3% commission x $240,000 = $7,200. And if the house sells for $250,000, she gets 3% commission x $250,000 = $7,500. An extra $300 for the additional effort to attract the most suitable buyer appears to be a fairly weak incentive for Maria, considering that she could have moved on to the next commission rather than putting time and energy into selling your house. This is an example of

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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