If the Market Supply and Demand Curves for a Common

question 208

Multiple Choice

If the market supply and demand curves for a common resource include all costs, then:

• A)the common resource will be underused.
• B)the common resource will be overused.
• C)the common resource will be used at the socially optimal level.
• D)there is an external cost to society from the common resource.

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Definitions:

Futures Contracts

Agreements to buy or sell an asset at a future date for a price that is determined today.

Hedge Cost

The expense associated with implementing a hedging strategy to minimize or manage financial risk.

Bushels

A unit of volume that is used in the United States for measuring agricultural commodities.

Swap Contract

A financial agreement where two parties exchange liabilities or cash flows from two different financial instruments.