If the Price of Pepsi-Cola Increases from 50 Cents to 60

question 177

Multiple Choice

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the Pepsi-Cola Company could increase its total revenue by

• A) lowering price.
• B) decreasing quantity supplied.
• C) leaving price the same.
• D) raising price.
• E) decreasing supply.

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Definitions:

Call Option

A call option gives the holder the right, but not the obligation, to buy an underlying asset at a specified price within a specific time period.

Premium

The amount by which the price of a financial asset exceeds its par or face value, or alternatively, the cost above the normal price paid to acquire an insurance policy.

Put Option

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

Put Premium

The cost associated with acquiring a put option, allowing the holder to sell an asset at a stipulated price within a specific timeframe, offering protection against asset depreciation.