Which of the Following Statements Is Most Accurate Regarding Who

question 356

Multiple Choice

Which of the following statements is most accurate regarding who benefits and loses from establishment of a minimum wage above the market clearing wage?

• A) Individuals who obtain jobs benefit because they earn a higher wage, but some individuals lose because employers will not hire them at the minimum wage.
• B) All workers benefit equally from the establishment of the minimum wage because just as many workers as before remain employed, and all earn the higher minimum wage.
• C) All employers benefit equally from the establishment of the minimum wage because they are able to hire fewer workers at a lower wage.
• D) All employers lose because they must pay the higher minimum wage to the same number of employees as they did before the minimum wage was established.

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Definitions:

Option Smirk

A pattern on the implied volatility graph for options across different strike prices that shows asymmetric volatility, often indicating market anticipation of movement.

Black-Scholes Option

A mathematical model used to price European options and derivatives by estimating the variation over time of financial instruments.

Implied Volatility

The market's forecast of a likely movement in a security's price, often derived from the price of its options.

Binomial Option Model

A mathematical model used to price options by breaking down the option's life into discrete time intervals and calculating the value at each step.