A wheat farmer who must purchase his inputs now but will sell his wheat at a market price at a future date:
A. is a good example of what the chapter refers to as a speculator.
B. would hedge by taking the short position in a wheat futures contract.
C. would hedge by taking the long position in a wheat futures contract.
D. faces a market risk that cannot be offset.
Answer: B
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How does the tax wedge influence potential GDP?
What will be an ideal response?
Monetarists view the use of monetary policy to fine-tune the economy as
A) unnecessary because the private sector is inherently stable. B) always inflationary. C) less predictable than fiscal policy. D) impossible because the Fed does not have the tools to control the money supply.
If the demand of a good is inversely related to income, it must be
A) a bad good. B) an inferior good. C) a normal good. D) an everyday product.
The Wong family consumes 3 pounds of fish and 5 pounds of chicken per month. The price of fish is $8 per pound and chicken is $4 per pound
a. What is the amount of income allocated to fish and chicken consumption? b. What is the price ratio (the price of fish relative to the price of chicken)? c. Explain the meaning of the price ratio you computed. d. If the Wongs maximize utility, what must the ratio of the marginal utility of fish to the marginal utility of chicken be equal to? e. If the price of chicken rises, will the Wong family consume more chicken, less chicken, or the same amount of chicken? Explain your answer using the rule of equal marginal utility per dollar. What will be an ideal response?