Which of the Following Statements Describes How a Price-Change in a Purely

question 57

Multiple Choice

Which of the following statements describes how a price-change in a purely competitive market would eliminate the surplus of an agricultural commodity?

• A) As the price increases, the quantity demanded increases while the quantity supplied decreases.
• B) As the price increases, the quantity demanded decreases while the quantity supplied increases.
• C) As the price decreases, the quantity demanded increases while the quantity supplied decreases.
• D) As the price decreases, the quantity demanded decreases while the quantity supplied increases.

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Definitions:

Forward Contract Premium

A Forward Contract Premium is the additional cost or value associated with entering into a forward contract compared to the spot price, reflecting expectations about future price movements.

Forward Contract Discount

A scenario where a forward contract trades at a lower price than the spot price of the underlying asset, indicating an expected decline in asset price.

Foreign Currency Market

A global marketplace for exchanging national currencies against one another, also known as the foreign exchange market.

Foreign Currency Option

A financial derivative that gives the holder the right, but not the obligation, to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specific date.