If Perfect Competition Existed Everywhere, Along with Frictionless Exchange, Perfect

question 155

Multiple Choice

If perfect competition existed everywhere, along with frictionless exchange, perfect information, and constant returns to scale,

• A)consumers would carry out transactions directly with resource suppliers
• B)firms would not have the information necessary to calculate marginal productivities of resources
• C)entrepreneurs would be needed to collect information
• D)consumers would produce output and then engage in barter
• E)the economy would be organized into one large firm

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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 security.

Put Option

A financial contract giving the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

In The Money

A term used in options trading to describe an option with intrinsic value - a call option with the underlying price above the strike price, or a put option with the underlying price below the strike price.