Lucas Owns a Large Farming Operation Which Encompasses Over 5,000

question 16

Multiple Choice

Lucas owns a large farming operation which encompasses over 5,000 acres of corn.The crop this year is abundant and will be ready for harvesting next month.Lucas likes the market prices today but expects the prices to decline over the next month as the supply of corn increases.Which one of the following positions should Lucas take to hedge his corn crop?

• A)sell in the spot market today
• B)buy in the spot market today
• C)take a long futures position
• D)take a short futures position
• E)sell in the spot today and take a long position in the futures market

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Definitions:

Industry Wide Markets

Pertains to markets that encompass products, services, and consumers across an entire industry, rather than being limited to specific segments.

Focused

Having clear concentration and attention on a specific task, goal, or activity, leading to increased efficiency and productivity.

Division Of Labor

The breaking down of work into a number of separate tasks to be performed by different workers, increasing efficiency and productivity.

Hierarchy Of Authority

A system of organization where entities are ranked according to levels of power and control, from highest to lowest.