If a price floor above the equilibrium price is imposed by government in a market:
| A. | Shortages of the commodity will develop | |
| B. | The quantity demanded will exceed the quantity supplied | |
| C. | The quantity supplied will exceed the quantity demanded | |
| D. | The free-market equilibrium price and quantity will still be realized |
In: Economics
The price in a perfectly competitive market is $8. At that
price, a firm is willing to supply 250 of a good. The firm's
average total cost (ATC) to supply this quantity will be $6.5 and
its average variable cost (AVC) will be $5.
What is the firm's Total Cost?
In: Economics
An oil price _______ is a sudden increase or decrease in the nominal or real price of oil. This is an example of a ________ -side shock.
Fill in the blanks
In: Economics
The current price of a stock is $50. In 1 year, the price will be either $65 or $35. The annual risk-free rate is 10%. Find the price of a call option on the stock that has an exercise price of $55 and that expires in 1 year. (Hint: Use daily compounding.)
In: Finance
In: Economics
Assume that output is given by with price of labour L = w and price of capital K = r
1.If capital in the short run is fixed at what is the short-run total cost?
2.Write the values for the derivatives of the Total cost with respect to w and r. Does Shephard’s lemma hold in this case?
In: Economics
If a maximum price is set below the equilibrium price, [1] there will be a shortage. [2] sellers will find it difficult to find willing buyers. [3] market equilibrium will occur despite government regulation. [4] all buyers will be able to purchase their desired quantities.
In: Economics
Based on a spot price of $46 and strike price of $48 as well as the fact that the risk-free interest rate is 6% per annum with continuous compounding, please undertake option valuations and answer related questions according to following instructions:
risk-free interest rate is 6% per annum with continuous compounding
Spot price: 46
Strike Price: 48
Use a two-step binomial tree to calculate the value of an eight-month European call option using the no-arbitrage approach
Additionally, assume that over each of the next two four-month periods, the share price is expected to go up by 11% or down by 10%.
Note: When you use no-arbitrage arguments, you need to show in detail how to set up the riskless portfolios at the different nodes of the binomial tree.
In: Finance
(a) The spot price of an asset is $135.00. The forward price for delivery in one year is $143.00. The risk-free rate is 5.4% per annum compounded continuously. Describe an arbitrage opportunity involving one asset (assume it has no storage cost and yields no dividend).
a. Go long one asset, take short position in one forward contract
b. Go short one asset, take short position in one forward contract
c. Go short one asset, take long position in one forward contract
d. Go long one asset, take long position in one forward contract
(b) Compute the profit after one year.
In: Finance
The price of a car is $32,000. You have saved 10% of the price for a down payment and will finance the balance with a 5-year loan at 8%. a.) Find the amount of the monthly payment. b.) What is the unpaid balance on the loan after 3 years? c.) How much will you have saved by paying off the loan early?
In: Accounting