A leading behavioral economist shows how businesses can improve consumer thinking and decision making on screens. acclaimed behavioral economist shlomo bernatzi reveals a toolkit or interventions for the digital age. using provocative case studies and engaging reader exercises.
Answer:
The value of the call option today is $7.73
Explanation:
The value or price of the call option under the two state model is calculated based on the assumption that there is no opportunity for arbitrage profit. The value of call option will be based on the return in case the call option is exercised and the probability of earning that return.
The strike price is $105
The return if price goes to $122 and option is exercised is 122 - 105 = $17
The return if the price goes down to $88 will be 0 as the call option will not be exercised.
Thus, the expected return is = 0.5 * 17 + 0.5 * 0 = $8.5
This return will be earned after 1 year. To calculate the value of the call option today, we need to discount this return to present value using the risk free rate.
V0 or value today = 8.5 / (1+0.1) = $7.727 rounded off to $7.73
Answer:
a short-run decision because the number of aircraft is held constant while the labor input is changed.
Explanation:
In the short run, at least one variable or factor of production is fixed and cannot be changed. In the long run, all factors of production can be changed.
In this case, the number of aircraft is the fixed factor of production (capital) while labor is variable because more pilots can be hired. Regulation state that pilots must rest a certain amount of time in between flights, so if you want to increase the amount of flights you need to hire more pilots and cabin crews since regulations do not require planes to rest.
It shows that the owner acknowledges the financial risks and is willing to pay every month to transfer the risk to an insurance company.
Answer:
a. Average total cost minus average fixed cost.
Explanation:
- Total cost of production (TC) can be expressed as the sum of two elements: total fixed cost (F) -those cost that do not vary with output level - and total variable cost (V) - which are those cost that vary with the level of production.
- Average total cost (ATC) is simply the division of total cost by the output produced (Q):
. - Average variable cost (AVC) is the division of variable cost by the output produced:
. - Then, average variable cost can be obtained by :
- dividing the total variable cost by output (option c) or
- subtracting to average total cost the fixed average cost (
), (option a).
