ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 2, Problem 7P
(a)
To determine
To graph: The
Concept Introduction:
PPF: It is a curve which shows the maximum possible output of two goods with the given set of efficiently used inputs
(b)
To determine
The meaning of shift of PPFand the adjustments needed to be incorporated in the personal life to make such PPF shift.
Concept Introduction:
PPF: It is a curve which shows the maximum possible output of two goods with the given set of efficiently used inputs.
(c)
To determine
The reason for the outward shift of PPF and whether the shift would be parallel one.
Concept Introduction:
PPF: It is a curve which shows the maximum possible output of two goods with the given set of efficiently used inputs
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18
200
20
16
16
14
PRICE (Dollars per dose)
12
10
10
8
4
2
MC = ATC
MR
Demand
0
0
5
10
15
20 25 30
35 40
45
50
QUANTITY (Millions of doses per year)
Monopoly Outcome
Monopoly Profits
Suppose that should the patent on this particular drug expire, the market would become perfectly competitive, with new firms immediately entering
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Consider a call option on a stock that does not pay dividends.
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The call strike is $100 (at the money).
The stock moves randomly with u=2 and d=0.5.
1. Write the system of equations to replicate the option using A shares and B bonds.
2. Solve the system of equations and determine the number of shares and the number of bonds
needed to replicate the option. Show your answer with 4 decimal places (x.xxxx); do not
round intermediate calculations. This is easy to do in Excel.
A =
B =
3. Use A shares and B bonds from the prior question to calculate the premium on the option.
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Call premium =
Chapter 2 Solutions
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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