A Commodity Producer Who Is Worried About Future Prices Can

question 12

Multiple Choice

A commodity producer who is worried about future prices can best hedge by:

• A) buying a futures contract.
• B) selling a futures contract.
• C) buying a call option.
• D) selling a call option.

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Definitions:

Pure Command System

An economic system characterized by the public ownership of resources and centralized planning.

Economic Questions

Economic questions are fundamental queries about how societies allocate scarce resources to produce goods and services for consumption, including decisions on what, how, and for whom to produce.

Resource Distribution

Refers to the allocation of resources, including land, labor, and capital, among different uses and geographic areas, affecting economic outcomes and efficiencies.

Property Rights

Legal rights to use, control, and derive benefits from resources such as land, intellectual property, and personal assets.