Which of the Following Statements Is True

question 62

Multiple Choice

Which of the following statements is true?

• A)Using a futures or forward contract to hedge a specific asset or liability risk is called macrohedging.
• B)Using a futures or forward contract to hedge a specific asset or liability risk is called microhedging.
• C)Using a futures or forward contract to hedge a specific asset or liability risk is called asset- or liability-specific hedging.
• D)Using a futures or forward contract to hedge a specific asset or liability risk is called naïve hedging.

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Definitions:

Excess Capacity

Plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost.

Monopolistic Competition

An economic model describing a market structure where many companies sell products that are similar but not identical, allowing for significant control over prices and product differentiation.

Industry Output

The total production of goods and services by all firms in a specific industry over a defined period.

Economic Profits

The excess of total revenues over total costs, including both explicit and implicit costs.