1. The reservation price is the price at which the consumer is _______ about additional search, meaning that the _______ of search equals the _______.
2. If a consumer knows that a product is available at some store at a price as low as $100, it is sensible to continue shopping until the consumer finds the lowest-price store. _______ (True/False)
3. Suppose the range of prices for a product is $10 to $20 and your discovered price (lowest price so far) is $16. If you visit one more store and discover a lower price, the best guess for a lower price is _______ and the savings if you discover this lower price is _______.
4. As the opportunity cost of search time increases, the reservation price _______ (increases, decreases) and the amount of search time (increases, decreases).
5. A doubling of prices (increases, decreases) the marginal benefit of search at a given _______ price, and the percentage gap between the reservation price and the lowest price _______ (increases, decreases).
6. Compute the Reservation Price. Suppose the range of prices for a consumer good is $20 to $60, and all prices in this range are equally likely.
a. Fill in the blanks in the table.
b. If the marginal cost of search is $1.25, the reservation price is _______.
7. Internet and Reservation Prices. Consider a country that initially has no Internet service or telephones, so consumers must travel to stores to get information about prices. Use a graph to show the effects of introducing Internet service on the reservation price for a consumergood.

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Discovered price (lowest so far) Probability of discovering lower price in next visit Best quess of lower price S40 $30 Savingsif lower price is discovered Marginal benefit Expected savings from additional visit