Samson Corporation Buys a Foreign Currency Future Contract as a Hedging

question 21

Multiple Choice

Samson Corporation buys a foreign currency future contract as a hedging strategy to protect against possible losses from fluctuations in a particular foreign exchange.This strategy suggests that Samson Corporation has:

• A)Foreign accounts payable and expects the exchange rate to fall.
• B)Foreign accounts receivable and expects the exchange rate to rise.
• C)Foreign accounts payable and expects the exchange rate to rise.
• D)Foreign accounts receivable and expects the exchange rate to fall.

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Definitions:

Economies of Scale

Refers to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.

Profit-Maximizing

A strategy or process where a firm determines the price, output level, or operational efficiency that will yield the highest possible profit.

Nondiscriminating Monopolist

A monopolist who charges the same price to all consumers for its products, regardless of differences in demand or willingness to pay.

Allocative Efficiency

Achieved when resources are distributed in a way that maximizes the net benefit to society, ensuring that each good is produced up to the point where the last unit provides a marginal benefit equal to the marginal cost of producing it.