Q1. a) what output will maximize profit? What is this profit?
b) Will output increase if the price rises to $4.50 to $5.25? Explain your answer.
Q2. Devise a hypothetical business situation in which buying a look back (giving the holder the right to buy or sell the underlying at the highest or lowest price it has attained over the life of the option)call option on a commodity may be a sound strategy for you. How about a down-and-out call option? The chapter deals with time, risk and options.