Which of the Following Statements Regarding Why No Futures Market

question 18

Multiple Choice

Which of the following statements regarding why no futures market exists for diamonds is INCORRECT?

• A) Diamond sellers,led by South African diamond manufacturing conglomerate De Beers,have acted as an effective cartel.
• B) Diamonds are hard to standardize.
• C) Price volatility is largely controlled by the De Beers-led cartel,which kills any incentive for hedgers and speculators to participate.
• D) There is no hedging demand from firms using diamonds for jewelry production.
• E) Given the market structure,a futures contract fails to play a price discovery role in the diamond market.

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Definitions:

Contract

A legally enforceable agreement between two or more parties where each agrees to fulfill certain obligations in exchange for benefits or considerations.

Court

A governmental institution where legal disputes are resolved by judges or a jury, and laws are interpreted and applied.

Mirror-Image Rule

A principle which holds that the terms of an acceptance must mirror the terms of the offer. If the terms of the acceptance do not mirror the terms of the offer, no contract is formed and the attempted acceptance is a counteroffer.

Acceptance

In contract law, it is the expression of assent to the terms of an offer in such manner as requested or authorized by the offeror.