(Table: Public Goods) the Table Shows the Number of Acres

question 257

Multiple Choice

(Table: Public Goods) The table shows the number of acres of a public park that four residents demand at different willingness-to-pay levels. The total willingness to pay for 3 acres is
$\begin{array}{|c|c|c|c|c|}\hline P & Q_{1} & Q_{2} & Q_{3} & Q_{4} \\\hline 0 & 7 & 10 & 5 & 4 \\\hline 1 & 6 & 9 & 4 & 3 \\\hline 2 & 5 & 8 & 3 & 2 \\\hline 3 & 4 & 7 & 2 & 1 \\\hline 4 & 3 & 6 & 1 & 0 \\\hline 5 & 2 & 5 & 0 & 0 \\\hline 6 & 1 & 4 & 0 & 0 \\\hline 7 & 0 & 3 & 0 & 0 \\\hline 8 & 0 & 2 & 0 & 0 \\\hline 9 & 0 & 1 & 0 & 0 \\\hline 10 & 0 & 0 & 0 & 0 \\\hline\end{array}$

• A) $10.
• B) $14.
• C) $18.
• D) $22.

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Definitions:

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a specific time period.

Underlying Stock

Underlying stock refers to the stock upon which a derivative contract, such as an option or futures contract, is based.

Black Scholes Model

A mathematical model used for pricing European call and put options, evaluating the options' theoretical value based on several factors including time, price, volatility, and the risk-free interest rate.

Exercise Price

The price at which the holder of an option can buy (for a call option) or sell (for a put option) the underlying asset.