Explain the popularity of options in the sense of the potential gains and losses they offer.
What will be an ideal response?
Option contracts are popular because for the option holder the upside of the option is very high. In the case of a call option, if the market price of the stock rises above the strike price the option gains significantly in value, and since (theoretically) market prices are not capped, the potential gains are very high. On the other hand, the option holder finds that the most he or she can lose is the fee paid for the option since the holder has the right to not exercise the option. From the option writer's perspective, many writers are speculating that the price of the asset will not move against them and for the option fee are willing to take that bet. It is hard to say that this is the group that makes the options popular. More likely it is the hedgers, the market makers in the underlying assets that transfer risk, that add to the popularity of options.
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Public goods are characterized by: a. rivalry in consumption
b. nonrivalry in consumption. c. excludability of nonpayers. d. none of the above
The equilibrium price is the price where quantity demanded is equal to supply
a. True b. False Indicate whether the statement is true or false
Which of the following is not correct?
a. Some economists believe that business owners who emphasize profit maximization will hire the most productive workers regardless of the personal characteristics of the worker; hence, these firms will drive discriminating firms out of business. b. Two economists found that employers in Boston and Chicago were about 50 percent more likely to interview job applicants named Emily and Greg than those named Lakisha and Jamal. c. Two economists found that women were less likely to participate in an experiment where they were paid based on math skills but more likely to participate when they were paid based on reading skills; men were more likely to participate when they were paid based on math skills and less likely to participate when they were paid based on reading skills. d. Economists found that the prices of older baseball cards were about 10 percent lower when the player was black rather than white.
When income rises for the buyers of good X, the ____________ curve for good X will shift ________________
A) demand; rightward B) demand; leftward C) supply; rightward D) supply; leftward E) This question cannot be answered unless we know whether good X is a normal good, a neutral good, or an inferior good.