Are monopolies indefinitely bad for society? As a price setter, how will a monopolist determine price? Provide specific examples of price discrimination that you have encountered. Do you believe price discrimination is fair?
In: Economics
A binding price floor exists when the price is not allowed to increase above a certain level.
True
False
Effective and binding price floors will NOT lead to a social surplus "dead-weight-loss."
| True |
|
False Inferior goods are negatively correlated to changes in income, i.e., as income increases the demand for inferior goods decreases.
|
In: Economics
You long a call option with a strike price of K. The underlying asset price on expiration date is S. What is your payoff?
Group of answer choices
S - K if S > K, but zero otherwise.
K - S if K > S, but zero otherwise.
0
S - K
You short a call option with a strike price of K. The underlying asset price on expiration date is S. What is your payoff?
Group of answer choices
K - S if S > K, and zero otherwise.
K - S
0
S - K if S > K, and zero otherwise.
You long a put option with strike K. The underlying price at expiration is S. What's your payoff?
Group of answer choices
K - S if K > S, and zero otherwise.
K - S
S - K
0
In: Finance
Assume that the price in a market is currently below the equilibrium price. Explain exactly why that situation will change by putting the steps in the correct order. 1) the steps repeat until there is a new equilibrium 2) Some buyers are willing to pay more for a good and sellers can raise prices while still selling all of their supply 3) prices begin to rise 4) quantity demanded begins to decrease and quantity supplied increases 5) the shortage becomes smaller 6) there is a shortage since quantity demanded is greater than quantity supplied 7) a new equilibrium is reached with a larger quantity exchanged and a higher price
In: Economics
c）The price of a European call that expires in six months and has a strike price of $30 is $2. The underlying stock price is $29, and a dividend of $0.50 is expected in two months and in five months. The term structure is flat, with all risk-free interest rates being 10% per year continuously compounded. What is the price of a European put option that expires in six months and has a strike price of $30?
d)Explain carefully the arbitrage opportunities in Problem c) if the European put price trades at $3.
Just answer question d.
In: Finance
Provide a definition of the price elasticity of demand and explain why knowing the price elasticity for her product is useful to the firm's manager.
In: Economics
If the cross-price elasticity of demand between Good A and Good B is 3, the price of Good B increases, and the price elasticity of demand for Good B is inelastic, we can expect to see a(n) ________ change in the quantity demanded for Good A.
| large |
| infinite |
| zero |
| small |
| one-for-one |
In: Economics
a) Price elasticity of demand for cigarettes is -0.5 in the short-run. Currently, the price per pack of cigarettes is $5.50 in Louisiana. $0.86 of this price is state tax and about $1 of the price is federal tax. Each year 350 million packs of cigarettes are sold in Louisiana. If the state government increases the state tax to $1.08 per pack, what would be the new state tax receipts from cigarettes after this tax increase? b) How would your answer to (a) change if you entertain the possibility of cross-border consumption? (people moving across state borders to buy cigarettes) DO NOT ASSERT! ANALYZE LIKE AN ECONOMIST! c) What will happen to tax revenues in the long-run? Why?
In: Economics
In: Economics
c）The price of a European call that expires in six months and has a strike price of $30 is $2. The underlying stock price is $29, and a dividend of $0.50 is expected in two months and in five months. The term structure is flat, with all risk-free interest rates being 10% per year continuously compounded. What is the price of a European put option that expires in six months and has a strike price of $30?
d）Explain carefully the arbitrage opportunities in Problem c) if the European put price trades at $3.
just answer question d
In: Finance