Which of the Following Statements Is True

question 55

Multiple Choice

Which of the following statements is true?

• A)The default risk in futures contracts is considered to be less than that of forward contracts because of daily marking to market of futures.
• B)The default risk in futures contracts is considered to be less than that of forward contracts because of margin requirements on futures that act as a security bond and because of default guarantees by the future exchange itself.
• C)The default risk in futures contracts is considered to be less than that of forward contracts because of price limits that spread out over times of extreme price fluctuations.
• D)All of the listed options are correct.

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Definitions:

Marginal Cost

The added expense incurred upon producing one further unit of a good or service.

Average Cost

The total cost of production divided by the quantity of output produced, indicating the cost per unit of output.

Short-run Cost Function

A relationship between production cost and output level when one or more inputs are fixed, typically analyzing costs within a time frame that doesn't allow for all factors of production to be adjusted.

Long-run Cost Function

A representation of the total cost associated with the production of goods over time, taking into account all variable and fixed inputs.