Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 12, Problem 40P
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market
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18
200
20
16
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PRICE (Dollars per dose)
12
10
10
8
4
2
MC = ATC
MR
Demand
0
0
5
10
15
20 25 30
35 40
45
50
QUANTITY (Millions of doses per year)
Monopoly Outcome
Monopoly Profits
Suppose that should the patent on this particular drug expire, the market would become perfectly competitive, with new firms immediately entering
the market with essentially identical products.
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Consider a call option on a stock that does not pay dividends.
The stock price is $100 per share, and the risk-free interest rate is 10%.
The call strike is $100 (at the money).
The stock moves randomly with u=2 and d=0.5.
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2. Solve the system of equations and determine the number of shares and the number of bonds
needed to replicate the option. Show your answer with 4 decimal places (x.xxxx); do not
round intermediate calculations. This is easy to do in Excel.
A =
B =
3. Use A shares and B bonds from the prior question to calculate the premium on the option.
Again, do not round intermediate calculations and show your answer with 4 decimal places.
Call premium =
Chapter 12 Solutions
Principles of Economics 2e
Ch. 12 - Identify the following situations as an example of...Ch. 12 - Identify whether the market supply curve will...Ch. 12 - For each of your answers to Exercise 12.2, will...Ch. 12 - Table 12.5 provides the supply and demand...Ch. 12 - Consider two approaches to reducing emissions of...Ch. 12 - Classify the following pollution-control policies...Ch. 12 - An emissions tax on a quantity of emissions from a...Ch. 12 - Four films called Elm, Maple, Oak, and (Shelly,...Ch. 12 - The rows in Table 12.7 show three market-oriented...Ch. 12 - Suppose a city releases 16 million gallons of raw...
Ch. 12 - The state of Colorado requires oil and gas...Ch. 12 - Consider the case of global environmental problems...Ch. 12 - A country called Sherwood is very heavily covered...Ch. 12 - What is an externality?Ch. 12 - Give an example of a positive externality and an...Ch. 12 - What is the difference between private costs and...Ch. 12 - In a market without environmental regulations,...Ch. 12 - What is command-and-control environmental...Ch. 12 - What are the three problems that economists have...Ch. 12 - What is a pollution charge and what incentive does...Ch. 12 - What is a marketable permit and what incentive...Ch. 12 - What are better-defined property rights and what...Ch. 12 - As the extent of environmental protection expands,...Ch. 12 - As the extent of environmental protection expands,...Ch. 12 - What are the economic tradeoffs between low-income...Ch. 12 - What arguments d0 low-income countries make in...Ch. 12 - In the tradeoff between economic output and...Ch. 12 - What does a point inside the production...Ch. 12 - Suppose you want to put a dollar value on the...Ch. 12 - Would environmentalists favor command-and-control...Ch. 12 - Consider two ways of protecting elephants from...Ch. 12 - Will a system of marketable permits work with...Ch. 12 - Is zero pollution possible under a marketable...Ch. 12 - Is zero pollution an optimal goal? Way or why not?Ch. 12 - From an economic perspective, is it sound policy...Ch. 12 - Recycling is a relatively inexpensive solution to...Ch. 12 - Can extreme levels of pollution hurt the economic...Ch. 12 - How can high-income countries benefit from...Ch. 12 - Technological innovations shift the production...Ch. 12 - Show the market for cigarettes in equilibrium,...Ch. 12 - Refer to Table 12.2. The externality created by...Ch. 12 - Table 12.12, shows the supply and demand...Ch. 12 - A city currently emits 15 million gallons (MG) of...Ch. 12 - In the Land of Purity, there is only one form of...
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