The Seller of Product a Has No Idle Capacity and Can

question 91

Multiple Choice

The seller of Product A has no idle capacity and can sell all it can produce at $50 per unit.Outlay cost is $12.What is the opportunity cost,assuming the seller sells internally?

• A) $12
• B) $38
• C) $50
• D) $62

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Definitions:

Underlying Asset

The financial instrument (such as a stock, bond, commodity, or currency) upon which a derivative's value is based.

In The Money

A term describing an option contract that has intrinsic value, meaning it is profitable to exercise.

Underlying Stock Price

The prevailing market value of the stock that a derivative contract, like an option, relies on.

February 20 Put

A put option that gives the holder the right to sell the underlying asset at a predetermined price on or before February 20.