The role of Government coerce in maximizing economic efficiency.

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Answer 1

Question

Chapter 5, Problem 1DQ

To determine

The role of Government coerce in maximizing economic efficiency.

Expert Solution & Answer

Explanation of Solution

When the government is allowed to coerce in the economy during some situations, it will help the economy to maximize the economic efficiency. The market system has the inherent problem for market failure. The market failure can be handled by the introduction of the public goods which will enforce the positive externalities.

The government can easily identify the unethical practices in the economy such as fraud and extortion etc. when the government is invested with the right to coerce; it can correct the unethical practices. It will help to reduce the risks associated with markets. Thus, investing the government with the right to coerce in the economy will help to maximize the economic efficiency.

Economics Concept Introduction

Concept introduction:

Economic efficiency: The economic efficiency is a situation in which all the economic resources are being efficiently utilized and the resource wastage is minimized.

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Students have asked these similar questions

5. Some people find options expensive and use more complex structures to reduce the cost. For example, consider buying a call with a strike of $55 and selling a call with a strike of $60. a. What is the cost of establishing this combined position? b. What is the payoff of the combined position if the market price goes to $60? c. What is the payoff of the combined position if the market price goes to $100?

3. An investor has $1,000 to invest. They believe the price of the underlier will increase to $60 within one year. a. How many shares of stock could they buy with the $1,000 at the current price of $50, and how much would they make if the share price increased to $60? b. How many calls with a strike of $55 could they buy for the same $1,000, and how much would they make if the share price increased to $60? c. How much would they make (or lose) from the stock and from the calls if the share price declined to $40? 4. What is the premium on a call with a strike of $0.01? Why is the premium so close to the $50 share price?

1. We want to examine the comparative statics of the Black Scholes model. Complete the following table using the Excel model from class or another of your choice. Provide the call premium and the put premium for each scenario. Underlier Risk-free Scenario price rate Volatility Time to expiration Strike Call premium Put premium Baseline $50 5% 25% 1 year $55 Higher strike $50 5% 25% 1 year $60 Higher volatility $50 5% 40% 1 year $55 Higher risk free $50 8% 25% 1 year $55 More time $50 5% 25% 2 years $55 2. Look at the baseline scenario. a. What is the probability that the call is exercised in the baseline scenario? b. What is the probability that the put is exercised? c. Explain why the probabilities sum to 1.

Answer 2

Question

Chapter 5, Problem 1DQ

To determine

The role of Government coerce in maximizing economic efficiency.

Expert Solution & Answer

Explanation of Solution

When the government is allowed to coerce in the economy during some situations, it will help the economy to maximize the economic efficiency. The market system has the inherent problem for market failure. The market failure can be handled by the introduction of the public goods which will enforce the positive externalities.

The government can easily identify the unethical practices in the economy such as fraud and extortion etc. when the government is invested with the right to coerce; it can correct the unethical practices. It will help to reduce the risks associated with markets. Thus, investing the government with the right to coerce in the economy will help to maximize the economic efficiency.

Economics Concept Introduction

Concept introduction:

Economic efficiency: The economic efficiency is a situation in which all the economic resources are being efficiently utilized and the resource wastage is minimized.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 5, Problem 1DQ

To determine

The role of Government coerce in maximizing economic efficiency.

Expert Solution & Answer

Explanation of Solution

When the government is allowed to coerce in the economy during some situations, it will help the economy to maximize the economic efficiency. The market system has the inherent problem for market failure. The market failure can be handled by the introduction of the public goods which will enforce the positive externalities.

The government can easily identify the unethical practices in the economy such as fraud and extortion etc. when the government is invested with the right to coerce; it can correct the unethical practices. It will help to reduce the risks associated with markets. Thus, investing the government with the right to coerce in the economy will help to maximize the economic efficiency.

Economics Concept Introduction

Concept introduction:

Economic efficiency: The economic efficiency is a situation in which all the economic resources are being efficiently utilized and the resource wastage is minimized.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 5, Problem 1DQ

To determine

The role of Government coerce in maximizing economic efficiency.

Expert Solution & Answer

Explanation of Solution

When the government is allowed to coerce in the economy during some situations, it will help the economy to maximize the economic efficiency. The market system has the inherent problem for market failure. The market failure can be handled by the introduction of the public goods which will enforce the positive externalities.

The government can easily identify the unethical practices in the economy such as fraud and extortion etc. when the government is invested with the right to coerce; it can correct the unethical practices. It will help to reduce the risks associated with markets. Thus, investing the government with the right to coerce in the economy will help to maximize the economic efficiency.

Economics Concept Introduction

Concept introduction:

Economic efficiency: The economic efficiency is a situation in which all the economic resources are being efficiently utilized and the resource wastage is minimized.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 5, Problem 1DQ

To determine

The role of Government coerce in maximizing economic efficiency.

Expert Solution & Answer

Explanation of Solution

When the government is allowed to coerce in the economy during some situations, it will help the economy to maximize the economic efficiency. The market system has the inherent problem for market failure. The market failure can be handled by the introduction of the public goods which will enforce the positive externalities.

The government can easily identify the unethical practices in the economy such as fraud and extortion etc. when the government is invested with the right to coerce; it can correct the unethical practices. It will help to reduce the risks associated with markets. Thus, investing the government with the right to coerce in the economy will help to maximize the economic efficiency.

Economics Concept Introduction

Concept introduction:

Economic efficiency: The economic efficiency is a situation in which all the economic resources are being efficiently utilized and the resource wastage is minimized.

Answer 6

Chapter 5, Problem 1DQ

To determine

The role of Government coerce in maximizing economic efficiency.

Expert Solution & Answer

Explanation of Solution

When the government is allowed to coerce in the economy during some situations, it will help the economy to maximize the economic efficiency. The market system has the inherent problem for market failure. The market failure can be handled by the introduction of the public goods which will enforce the positive externalities.

The government can easily identify the unethical practices in the economy such as fraud and extortion etc. when the government is invested with the right to coerce; it can correct the unethical practices. It will help to reduce the risks associated with markets. Thus, investing the government with the right to coerce in the economy will help to maximize the economic efficiency.

Economics Concept Introduction

Concept introduction:

Economic efficiency: The economic efficiency is a situation in which all the economic resources are being efficiently utilized and the resource wastage is minimized.

Answer 7

Chapter 5, Problem 1DQ

To determine

The role of Government coerce in maximizing economic efficiency.

Answer 8

Expert Solution & Answer

Explanation of Solution

When the government is allowed to coerce in the economy during some situations, it will help the economy to maximize the economic efficiency. The market system has the inherent problem for market failure. The market failure can be handled by the introduction of the public goods which will enforce the positive externalities.

The government can easily identify the unethical practices in the economy such as fraud and extortion etc. when the government is invested with the right to coerce; it can correct the unethical practices. It will help to reduce the risks associated with markets. Thus, investing the government with the right to coerce in the economy will help to maximize the economic efficiency.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Concept introduction:

Economic efficiency: The economic efficiency is a situation in which all the economic resources are being efficiently utilized and the resource wastage is minimized.

Answer 12

Ch. 5.A - Prob. 1ADQ Ch. 5.A - Prob. 2ADQ Ch. 5.A - Prob. 3ADQ Ch. 5.A - Prob. 1ARQ Ch. 5.A - Prob. 2ARQ Ch. 5.A - Prob. 3ARQ Ch. 5.A - Prob. 1AP Ch. 5.A - Prob. 2AP Ch. 5 - Prob. 1DQ Ch. 5 - Prob. 2DQ

The role of Government coerce in maximizing economic efficiency.

The role of Government coerce in maximizing economic efficiency.

Explanation of Solution

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