Figure 6-7 -Refer to Figure 6-7.Suppose a Price Ceiling of $5 Is

question 83

Multiple Choice

Figure 6-7
-Refer to Figure 6-7.Suppose a price ceiling of $5 is imposed on this market.As a result,

• A)the quantity of the good supplied decreases by 20 units.
• B)the demand curve shifts to the left;quantity sold is now 30 units and the price is $5.
• C)buyers' total expenditure on the good decreases by $80.
• D)the price of the good continues to serve as the rationing mechanism.

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Definitions:

Exercise Price

The price stated in the option contract at which the security can be bought (or sold). Also called the strike price.

Common Stock

A form of corporate equity ownership, representing a claim on a portion of the company's profits and a right to vote on management decisions.

Warrants

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a security at a predetermined price before a specific date.

Convertibles

Convertibles are bonds or preferred stocks that can be converted into a predetermined number of common stock or equity shares.