Answer the questions below:

1) It is claimed that price floors and price ceilings both reduce the actual quantity exchanged in a market. Use a diagram or diagrams to support this conclusion, and explain the common sense behind it.

2) Explain why an effective minimum wage law that is not changed over time may eventually become ineffective as demand for workers increases.

3) Last October, the highest-paying passenger on United Flight 815 from Chicago to Los Angeles paid $1,248.51. The lowest-paying passenger on the same flight paid $87.21. Can we say anything about the likely elasticities of demand of the two customers? Use the concepts of marginal analysis and opportunity cost to explain why it might make sense for United Airlines to charge some lucky soul so little.

4) Why are college textbooks so expensive when other books that cost the same to produce have a lower price?

discuss whether price discrimination is efficient. And then discuss another example of price discrimination and whether you think it is appropriate.

​Eagletron's current stock price is $10.

Suppose that over the current​ year, the stock price will either increase by 95%

or decrease by 45%.

​Also, the​ risk-free rate is

25 %25%

​(EAR).

a. What is the value today of a​ one-year at-the-money European put option on Eagletron​ stock?

b. What is the value today of a​ one-year European put option on Eagletron stock with a strike price of

$ 19.50$19.50​?

c. Suppose the put options in parts

​(a​)

and

​(b​)

could either be exercised​ immediately, or in one year. What would their values be in this​ case?

Relationship between Price, Quantity Demanded and Quantity Supplied

There is an inverse relationship between price of a good and the quantity demanded and a direct relationship between the price of a good and the quantity supplied. For example, an increase in the price will cause a decrease in the quantity demanded and an increase in the quantity supplied.

Choose a good or service and speculate how the quantity demanded or supplied will change with a given change in price. (Pick any good or service…. plumbers, teachers, gasoline, butter, eggs, etc.)

9.   You read that the own-price elasticity for college tuition is -2.5. If price rises by 5%, what is the predicted change in quantity demanded (assuming all other factors equal)?

a. fall of 5%

b. fall of 12.5%

c. increase of 5%

d. increase of 12.5%

The non-binding price floor is the minimum legal price at which a good can be sold ______ the equilibrium price and the non-binding price ceiling is the maximum legal price at which a good can be sold _____ the equilibrium price.

Below: Below

Above: Below

Above: Above

Below: Above

If demand is ________, total revenue stays the same regardless of change in price because total revenue reaches its __________.

Elastic: Maximum

Inelastic: Minimum

Unit-elastic: Maximum

Unit-elastic: Minimum

Describe hospitals transition to price competition?

Describe hospital price competition in theory and practice?

Discussion Board – Price Skimming

Price skimming strategy is a new product strategy that results in a high initial product price being reduced over time as demand at the higher price is satisfied. Research product or service that may have entered the market with a high initial price and now the demand at the higher price is satisfied. Discuss why you believe consumer demand has changed for this product or service which resulted in satisfaction of the market.

1) Explain the difference between a bid price and an asked price and also explain why the prices are different.

2) Explain what a mortgage-backed security (MBS) is and how it functions. Also, explain why these securities were such a problem during 2008.

3) What is the meaning of a pure discount or zero coupon debt instrument?

Suppose ABC stock pays no dividends and has a current price of $50. The forward price for delivery in 1 year is $55. Suppose the 1-year effective annual interest rate is 10%.

(a) Graph the payoff and profit diagrams for the one year forward contract.

(b) Is there any advantage to investing in the stock or the forward contract? Why?

(c) Suppose ABC paid a dividend of $2 per year and everything else stayed the same. Now is there any advantage to investing in the stock or the forward contract? Why?

*YOU MUST ANSWER WITH DETAILED WORKING!!