What is perfect competition.

(5 points) In a financial market with only two assets, a risk-free account and a risky asset (stock), let B(t) and S(t) be the respective prices of these assets at time t. Assume a single period where at the end of the period, there are only two possible states of the world: @ and @, You are given: 1. B(0) =1, S(0) =100 2. The values of the assets at the end of the period: Risk-free Stock State B() S(D) 1.05 1.05 150 (a) (0.5 points) Determine the range of a so that there is no arbitrage opportunity. Suppose a = 80. (b) (/ point) Calculate the state prices in this market. (c) (0.5 points) Interpret these state prices. (d) (/ point) Calculate the risk-neutral probabilities of stock price movements in this market. (e) (/ point) Calculate the price of a straddle with payoff equal to S(1)-100), which expires at the end of the period, using the risk-neutral probabilities. (f) (/ point) Confirm the value in (e) using the state prices calculated in (b).Discuss the limitations to the cardinal utility? What are the two approaches to measure utility? Discuss the difference centralization and decentralization. Discuss the liquidity preference theory. Discuss the Harold Domar Model? Discuss the key limitations of the Harrod Domer