An Agreement That Grants Its Owner the Right, but Not

question 25

Multiple Choice

An agreement that grants its owner the right, but not the obligation, to buy or sell a specific asset at a specific price for a set period of time is called a(n) ________ contract.

• A) option
• B) forward
• C) futures
• D) swap
• E) spot

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Definitions:

Marginal Cost

Marginal cost is the change in total production cost that arises when the quantity produced is incremented by one unit.

Variable Inputs

Inputs in production that can be adjusted based on the production volume, including labor hours and raw materials, distinguishing them from inputs that remain constant.

Labor

The effort involving both bodily and intellectual activities applied in generating goods and services.

AVC

Average Variable Cost, the total variable cost divided by the quantity of output produced.