An Example of a Real Option Is

question 48

Multiple Choice

An example of a real option is:

• A)the option to make follow-on investments.
• B)the option to abandon a project.
• C)the option to wait before investing.
• D)all of the options.

---

Definitions:

Allocative Efficiency

A state of resource allocation where it is impossible to make any one individual better off without making at least one individual worse off.

Productive Efficiency

A condition in which an economy or entity is utilizing all its resources efficiently, producing maximum output for a given set of inputs without waste.

Demand (D)

The quantity of a good or service that consumers are willing and able to purchase at various prices during a certain period of time.

Supply (S)

The total amount of a good or service that is available for purchase at any given price level in a market.