Use the Figure for the Question(s)below

question 48

Multiple Choice

Use the figure for the question(s) below.
-This graph depicts the payoffs of a

• A)a long position in a put option at expiration.
• B)short position in a call option at expiration.
• C)a short position in a put option at expiration.
• D)a long position in a call option at expiration.

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Definitions:

Equilibrium Output

The level of output at which the quantity supplied equals the quantity demanded, leading to a stable market condition without surplus or shortage.

Purely Competitive Market

A theoretical market structure characterized by an infinate number of buyers and sellers, homogeneous products, and no barriers to entry or exit.

Consumer Surplus

The distinction between what consumers are willing and able to allocate financially for a good or service, and what they actually allocate.

Purely Competitive Market

A purely competitive market is characterized by many buyers and sellers, homogenous products, and no barriers to entry or exit, leading to price taking behavior by individuals.