The Exercise Price in an Option Contract Is

question 473

Multiple Choice

The exercise price in an option contract is:

• A) The price of the underlying instrument at the time of the transaction
• B) The price at which the transaction on the underlying instrument will be carried out if and when the option is exercised
• C) The price the buyer of the option pays to the seller when entering into the options contract
• D) The price at which the two counterparties can close-out their position

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Definitions:

Marginal Revenue

The additional income earned by selling one more unit of a product or service.

Minimum AVC

The lowest point on the Average Variable Cost curve, indicating the most efficient scale of production where variable costs per unit are minimized.

Economic Losses

Refers to the situation where total costs exceed total revenues, leading to a negative net income for a business.

Marginal Cost

The growth in overall costs resulting from the manufacture of one more unit of a good or service.