A Manufacturer of Breakfast Cereals Has the Opportunity to Purchase

question 71

Multiple Choice

A manufacturer of breakfast cereals has the opportunity to purchase barley at $3.00 a bushel for 10,000 bushels,if it also buys 5000 bushels of wheat at $16.00 per bushel.However,the manufacturer does not use any barley in its products,and currently needs 20,000 bushels of wheat.If the current market price of barley is $3.80 per bushel,and wheat is $15.80 per bushel,should this opportunity be taken,and why?

• A)Because the company has no need of barley,the opportunity should not be taken.
• B)Because the opportunity does not meet the company's need for wheat,the opportunity should not be taken.
• C)Because the value of the opportunity is positive,the opportunity should be taken.
• D)Because the value of the opportunity is negative the opportunity should not be taken.

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Definitions:

Price Level

Price level indicates the average of current prices across the entire spectrum of goods and services produced in the economy, often compared over time to assess inflation or deflation.

Aggregate Demand Curve

The total demand curve illustrates the overall volume of goods and services the economy requires at various price points.

Investment Demand Curve

A graph showing the relationship between the rate of interest and the total amount of investment demanded by all sectors in the economy.

Market Interest Rate

The prevailing rate at which borrowers can secure loans and lenders receive returns, determined by supply and demand in the money market.