You Sold Short 100 Shares of Common Stock at $45

question 17

Multiple Choice

You sold short 100 shares of common stock at $45 per share. The initial margin is 50%. At what stock price would you receive a margin call if the maintenance margin is 35%?

• A) $50
• B) $65
• C) $35
• D) $40

Evaluate the economic welfare implications of price changes on utility.

Understand the concept of endowments and the effect of changes in prices on consumption choices.

Analyze the trade-offs between labor income and leisure in determining optimal work hours.

Discuss the role of substitution and income effects on consumption choices following price changes.

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Definitions:

Independence of Irrelevant Alternatives

A principle in decision theory stating that the preference between two options should not change because of the introduction of new alternatives.

Median Voter

A theoretical concept that suggests the outcome of a majority vote is most likely to represent the preferences of the voter who is in the middle of the political spectrum.

Majority Rule

A decision rule that selects alternatives which have a majority, that is, more than half the votes.

Median Voter Theorem

A political science theory suggesting that the outcome of a majority-vote election is most likely to represent the preferences of the median voter.