A Producer Has Purchased Cotton Futures That Involve 50,000 Pounds

question 66

Multiple Choice

A producer has purchased cotton futures that involve 50,000 pounds of cotton at a price of $0.80 per pound. By contract expiration the producer finds that cotton prices have declined by $0.07 per pound. As a result of the futures contracts, the producer will:

• A) lose $3,500 per contract in the futures market which offsets gains in the cash market.
• B) gain $3,500 per contract in the futures market which offsets losses in the cash market.
• C) lose $3,500 per contract in the futures market and suffer an opportunity cost in the cash market.
• D)gain $3,500 per contract in the futures market and gain $0.07 per pound in the cash market.

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Definitions:

McDonaldization

The process by which the principles of the fast-food industry, such as efficiency and standardization, have come to dominate other sectors of society.

Calculability

A principle, often related to rationalization and modernity, emphasizing quantification and measurement in decision-making processes.

Quantity Over Quality

A focus on producing or achieving more in number, often at the expense of excellence or condition.

McDonaldization

The process by which the principles of fast food restaurants are coming to dominate more sectors of societies worldwide, emphasizing efficiency, predictability, and control.