If the Intended Aim of the Price Floor Set in the Graph

question 111

Multiple Choice

If the intended aim of the price floor set in the graph shown was a net increase in the well-being of producers,then positive analysis would have us consider:

• A)the policy to be effective if area C is larger than area E.
• B)the policy to be effective if area E + B is larger than C +D + F.
• C)the policy to be ineffective if area B is larger than area E.
• D)the policy to be ineffective if area E + B is larger than A+C+D+ F.

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Definitions:

Deep in the Money

An options trading term referring to options with an exercise price far below (for calls) or above (for puts) the market price of the underlying asset.

Time to Expiration

The remaining period until the expiration date of a financial instrument such as an option or futures contract.

Intrinsic Value

The inherent worth of an asset, independent of its market price.

Actual Value

The true, inherent, or fair value of an asset, reflecting its genuine worth as opposed to market price or cost.