PRINCIPLES OF MICROECONOMICS (OER)
2nd Edition
ISBN: 9781947172340
Author: Timothy Taylor, Steven A. Greenlaw
Publisher: OpenStax
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Textbook Question
Chapter 9, Problem 11RQ
What is predatory
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1. A firm has the following demand function: P = 60 – 0.5Q and its total cost is defined by TC= 13+ Qa. Find the maximum revenue b. Find the production to optimize the profit. c. Verify if the marginal revenue and marginal cost are the same at the profit-maximizing productionlevel. Exercise 6From the point of view of the firm, what decision criteria have been found relevant in the analysis ofproduction and profit? Provide two refernces with your answer.
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?
Chapter 9 Solutions
PRINCIPLES OF MICROECONOMICS (OER)
Ch. 9 - Classify the following as a government-enforced...Ch. 9 - Classify the following as a government-enforced...Ch. 9 - Suppose the local electrical utility, a legal...Ch. 9 - If Congress reduced the period of patent...Ch. 9 - Suppose demand for a monopolys product falls 50...Ch. 9 - Imagine a monopolist could charge a different...Ch. 9 - How is monopoly different from perfect...Ch. 9 - What is a barrier to entry? Give some examples.Ch. 9 - What is a natural monopoly?Ch. 9 - What is a legal monopoly?
Ch. 9 - What is predatory pricing?Ch. 9 - How is intellectual property different from other...Ch. 9 - What legal mechanisms protect intellectual...Ch. 9 - In what sense is a natural monopoly natural?Ch. 9 - How is the demand curve perceived by a perfectly...Ch. 9 - How does the demand curve perceived by a...Ch. 9 - Is a monopolist a price taker? Explain briefly.Ch. 9 - What is the usual shape of a total revenue curve...Ch. 9 - What is the usual shape of a marginal revenue cuwe...Ch. 9 - How can a monopolist identify the...Ch. 9 - How can a monopolist identify the...Ch. 9 - When a monopolist identifies its profit-maximizing...Ch. 9 - Is a monopolist allocatively efficient? Why or why...Ch. 9 - How does the quantity produced and price charged...Ch. 9 - ALCOA does not have the monopoly power it once...Ch. 9 - Why are generic pharmaceuticals significantly...Ch. 9 - For many years, the Justice Department has tried...Ch. 9 - Intellectual property laws are intended to promote...Ch. 9 - Imagine that you ale managing a small firm and...Ch. 9 - If a monopoly firm is earning profits, how much...Ch. 9 - Return to Figure 9.2. Suppose P0 is 10 and P1 is...Ch. 9 - Draw the demand curve, marginal revenue, and...Ch. 9 - Draw a monopolists demand curve, marginal revenue,...
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- 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.arrow_forwardSome people say that since inflation can be reduced in the long run without an increase in unemployment, we should reduce inflation to zero. Others believe that a steady rate of inflation at, say, 3 percent, should be our goal. What are the pros and cons of these two arguments? What, in your opinion, are good long-run goals for reducing inflation and unemployment?arrow_forwardExplain in words how investment multiplier and the interest sensitivity of aggregate demand affect the slope of the IS curve. Explain in words how and why the income and interest sensitivities of the demand for real balances affect the slope of the LM curve. According to the IS–LM model, what happens to the interest rate, income, consumption, and investment under the following circumstances?a. The central bank increases the money supply.b. The government increases government purchases.c. The government increases taxes.arrow_forward
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