Use the Following for Questions 40-42

question 71

Multiple Choice

Use the following for questions 40-42.
Exhibit: Profit Maximization for a Firm in Monopolistic Competition

-(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC´.Suppose further that after the innovation reduced the cost to ATC´, it costs a total of $18 per unit to produce 170 units per day.If the firm charges a price equal to marginal cost, total net profit will be:

• A) $1,190.
• B) $1,700.
• C) $3,060.
• D) $3,400.

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Definitions:

Put Option

A financial contract giving the option buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time frame.

At the Money

A term used in options trading to describe a situation where the market price of the underlying asset is equal to the strike price of the option.

Conversion Value

The value of a convertible security if it were converted into a different security, typically shares of the issuing company's stock.

Convertible Bond

A bond that allows the holder to exchange it for a specific number of the issuer's stock shares at chosen times throughout its duration, typically at the holder's option.