Consider a single query with 2 ad slots. Position CTRs are [0.10, 0.06]. Three advertisers have bids b and quality scores q as: A: b=3, q=2.0; B: b=4, q=1.5; C: b=5, q=1.0. Reserve price r=1.0. Ranking is by b·q. Answer: 1) Under GSP with quality scores, determine the allocation and per-click prices. Use the standard payment formula p_i = (next advertiser’s b·q)/q_i (respecting reserve r). Compute expected revenue and welfare (sum over slots of CTR_slot × value per click where value≈true bid; assume bids reflect values for this part). 2) Under VCG with quality scores and the same reserve, compute each winner’s per-click price and the platform’s expected revenue; compare to GSP. 3) Show a profitable bid shading deviation for B (if one exists) under GSP given A and C bid truthfully. Identify a shading range that preserves B’s slot while reducing price. 4) If each advertiser has a daily budget cap that induces pacing (effective bid multiplier α∈(0,1]), explain how pacing interacts with the quality-adjusted ranking and which mechanism (GSP vs VCG) better preserves truthful reporting under budget constraints.