Suppose you hedge with a put option. What are the consequences of selecting a put option with a lower strike price?
A. Higher premium, lower price floor.
B. Higher premium, higher price floor.
C. Lower premium, lower price floor.
D. Lower premium, higher price floor.
Ans: C. Lower premium, lower price floor.
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A production possibilities frontier shows
A) the various combinations of output a nation can produce a certain time, given its available resources and technology. B) the limits to future growth of a nation. C) how money can be allocated among two kinds of goods. D) that if price of one good decreases, the price of the other has to increase. E) that it is impossible to produce inefficiently.
Suppose that along a linear demand curve, the elasticity of demand is equal to 1 when the price is $4 and the quantity is 100 units. Then the
A) total revenue is at its maximum when 100 units are produced. B) marginal revenue is positive at 100 units. C) marginal revenue is negative at 100 units. D) Both answers A and B are correct. E) Both answers A and C are correct.