A market maker faces the following demand and supply for widgets. Eleven buyers are willing to buy at the following prices: $15, $14, $13, $12, $11, $10, $9, $8, $7, $6, $5. Eleven sellers are also willing to sell at the same prices. If the market maker decides to only make one transaction what is his profit/bid-ask margin a.$16 b.$12 c.$8 d.$10

The market maker's profit/bid-ask margin is d. $10.

Explanation:

The market maker would like to select the buyers willing to buy at $15 and the seller willing to sell at $5.  His spread will be the difference between $15 and $5, which is $10.

In this example, the market maker is an individual market participant who buys and sells widgets at prices displayed in the market.  These prices prices at which buyers and sellers are willing to buy and sell.  Since his primary goal is to make enough profit, he is likely to sell to the buyer with the highest bid price and buy from the seller with the lowest ask price, if this were possible at all times.

The bid-ask spread is the amount by which the ask price exceeds the bid price.

a

explanation:

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