Marginal Cost Is

question 69

Multiple Choice

Marginal cost is:

• A) always less than average variable cost.
• B) more affected by fixed costs than by variable costs.
• C) the change in total cost that results from producing one more unit.
• D) the point where the firm's total cost will just equal total revenue.
• E) the extra profit on the last unit.

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Definitions:

Exercise Price

The predetermined 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.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase a stock or other asset at a specified price within a specified time.

Risk-free Rate

Often considered as the return on government securities, it represents the interest an investor would expect from an absolutely risk-free investment over a specified period.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified period.