Use the Following to Answer Questions

question 2

Multiple Choice

Use the following to answer questions:
Figure: A Tariff on Imports
-(Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total value of deadweight loss as a result of the tariff is:

• A) $150 million.
• B) $200 million.
• C) $400 million.
• D) $550 million.

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Definitions:

Exercise Price

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

Share Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell shares of a company at a predetermined price within a specific timeframe.

Remuneration Expense

The total cost incurred by an organization for paying salaries, wages, bonuses, and other benefits to its employees.

Exercise Price

The price at which the holder of a share option or financial derivative can buy (or sell) the underlying asset or security.