The Purchase of a Futures Contract to Offset Potential Losses

question 63

Multiple Choice

The purchase of a futures contract to offset potential losses from rising prices is a(n) ________ hedge.

• A) long
• B) open
• C) market
• D) short
• E) speculative

---

Definitions:

Groupthink

A psychological phenomenon where the desire for harmony or conformity within a group leads to an irrational or dysfunctional decision-making outcome.

Harmony

A state of agreement, peacefulness, or concord between individuals or groups; also refers to a pleasing combination of musical notes.

Cognitive Dissonance

A psychological state that occurs when an individual holds two or more contradictory beliefs, ideas, or values at the same time, often leading to discomfort and a drive to reduce the inconsistency.

Social Pressure

The influence that is exerted by society or a social group on an individual, encouraging conformity to social norms or expectations.