Assume There Are Three Hardware Stores,each Willing to Sell One

question 133

Multiple Choice

Assume there are three hardware stores,each willing to sell one standard model hammer in a given time period.House Depot can offer their hammer for a minimum of $7.Lace Hardware can offer the hammer for a minimum of $10.Bob's Hardware store can offer the hammer at a minimum price of $13. Given the scenario described,if the market price of hammers increased from $6 to $7:

• A) total producer surplus would increase.
• B) total producer surplus would remain unchanged.
• C) total producer surplus would decrease.
• D) total producer surplus cannot be determined with the information given.

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Definitions:

Black-Scholes

A mathematical model used to calculate the theoretical price of European style options based on risk, time, and other factors.

Variance

A statistical measure of the dispersion or spread between numbers in a data set.

Call Option

A financial contract giving the option buyer the right, but not the obligation, to buy a specified quantity of an asset at a set price within a specified time.

Call Option

A finance-related agreement that allows the buyer the choice, yet not the duty, to purchase an equity, debt instrument, commodity, or another type of asset at an agreed-upon price within a set period.