The other-things-constant assumption
a. allows the economist to make useful predictions
b. is a prediction
c. applies only to consumers' decisions, not to those of firms
d. forces the economist to ignore reality, where things are constantly changing
e. implies rational self-interest on the part of all economic actors
A
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Assume you pay a premium of $0.50/bu for a put option with a strike price of $4.00/bu and that the current futures price is $3.75/bu. Then, the option is:
A. In-the-money B. At-the-money C. Out-of-the-money D. None of the above
The owner of a restaurant is considering lowering menu prices to draw in more customers. He is debating between lowering the price for the steak entrée or the salmon entrée. When he lowered prices last year, a $2.00 decrease in price for the $15
steak resulted in a growth in steak sales from 75 per week to 100 per week. A $2.50 decrease in the price of the $17 salmon entrée increased sales from 40 to 75 meals per week. Which entree should he choose to put on sale? Please provide the best answer for the statement.