You Short Sell Contract a at 428 and Buy Contract

question 90

Multiple Choice

You short sell contract A at 428 and buy contract B at 333. After one month, you close contract A at 435 and contract B at 339. What is you net profit in points?

• A) -13
• B) -1
• C) 1
• D) 13

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Definitions:

Excess Capacity

A situation where a company can produce more goods than the market demands, often leading to inefficiencies.

Monopolistic Competition

A market structure featuring many firms selling products that are similar but not identical, allowing for competition based on quality, price, and marketing.

Chronic Excess Capacity

A persistent situation in which industries or firms have more production capacity available than is being used, often leading to economic inefficiencies and reduced profit margins.

Minimum-Cost Output

The quantity of output at which the average total cost is lowest—the bottom of the U-shaped average total cost curve.