Arkansas Auctioneer Practice Exam

A buyer's premium is an additional fee that the winning bidder must pay on top of the final bid price of the item being auctioned. This premium serves as a significant source of income for the auctioneer and helps to cover the costs associated with running the auction. By collecting a percentage of the sale price from the buyer, the auctioneer can ensure that they are compensated for their services, including marketing, managing the auction event, and facilitating the transaction. Therefore, the purpose of the buyer's premium is effectively to supplement the auctioneer's income, making this the correct answer.

In an auction context, determining the starting bid, reducing the number of participants, or covering transaction costs for the seller are not the primary functions of the buyer's premium. The starting bid is usually established independently of the buyer's premium, while a buyer's premium does not aim to impact participant numbers or function solely as a means of addressing seller costs. Instead, it directly benefits the auctioneer financially, reflecting the operational and organizational expenses incurred during the auction process.