If an Increase in Oil Prices Made It Profitable to Use

question 85

Multiple Choice

If an increase in oil prices made it profitable to use corn-based ethanol for fuel and corncobs are a waste product of ethanol production, what will happen in the market for corncob pipes?

• A) Supply will increase, prices will fall, and sales will increase.
• B) Supply will decrease, prices will rise, and sales will decrease.
• C) Demand will increase, prices will rise, and sales will increase.
• D) Demand will decrease, prices will fall, and sales will decrease.

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Definitions:

Risk-Free Asset

An investment with a guaranteed return and no possibility of default, typically associated with government bonds.

Market Return

The total gain or loss on an investment over a specified period, including dividends and capital gains.

Systematic Risk

It represents the risk inherent to the entire market or market segment, often influenced by factors such as economic, political, or social changes.

Treasury Bills

Short-term government securities issued at a discount from the par value and paying no interest, maturing in one year or less, representing a secure, liquid investment.