The Optimal Quantity of a Negative Externality Is Zero If

question 95

Multiple Choice

The optimal quantity of a negative externality is zero if:

• A)it kills many people.
• B)it is costly to negotiate a Coasean solution.
• C)people vote against it in a democratic election.
• D)the marginal cost of reducing it is zero.

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Definitions:

Black-Scholes Option Pricing Model

A mathematical model used to price European call and put options by calculating the option's expected payoff at expiration.

Strike Price

The specified price at which the holder of an option contract can buy (in case of a call option) or sell (in case of a put option) the underlying security.

Black-Scholes Option Pricing Model

A mathematical formula used to determine the theoretical price of European put and call options, taking into account factors like the stock price, strike price, time to expiration, and volatility.

Strike Price

The set price at which the holder of a financial option has the right to buy (call) or sell (put) the underlying asset.