Use the Figure for the Question(s)below

question 101

Multiple Choice

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

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

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Definitions:

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, characterized by a reduction in average cost per unit when output is increased.

Diseconomies of Scale

The phenomenon where production costs per unit increase as the volume of output increases.

Constant Returns to Scale

A situation in economics where increasing the inputs in production proportionately increases the output.

Constant Returns to Scale

The situation where an increase in all inputs by a certain factor leads to an increase in output by the same factor, showing linear scalability in production.