One Distinguishing Difference Between the Buyer of a Futures Contract

question 29

Multiple Choice

One distinguishing difference between the buyer of a futures contract and the buyer of an option contract is that the futures buyer:

• A)Pays a much higher premium than option buyers
• B)Has an obligation to purchase, not a choice
• C)Can lose no more than the initial premium
• D)Has increased rather than reduced risk

---

Definitions:

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they can be used by anyone and one person's use does not reduce its availability to others.

Free-Rider Problem

A situation where individuals consume a public good without contributing to its cost, benefiting from the good without paying for it.

Samuelson's Theory

Refers to economist Paul Samuelson's contributions to economic theory, including insights on public goods, trade, and welfare economics.

Public Expenditure

Government spending on the provision of goods, services, and infrastructure to the public.