Suppose that you have wheat in storage and that the price of wheat is currently $5.00 per bushel. You can sell your wheat immediately but you also have an opportunity to sell in six months. At that time, you believe the price of wheat will be $5.60 per bushel. Your cost of storage is $0.75 per bushel for six months. One dollar in six months is worth one dollar today (no discounting). What strategy is profit maximizing?
A. Hold onto your wheat and sell in six months.
B. Sell your wheat today.
C. Minimize your losses by exiting the wheat market.
D. Expand production to sell more wheat.
Ans: B. Sell your wheat today.
You might also like to view...
Suppose transactions costs are created by a principal-agent problem. If the objective is economic efficiency, who should be made liable for damages resulting from the interaction of the principal and the agent?
a. The principal should be liable for all damages. b. The agent should be liable for all damages. c. Liability for damages should be equally split between the principal and the agent. d. The assignment of liability is irrelevant according to the Coase Theorem.
Equivalent variation means
A. finding an equivalent change in income that puts a person on the same utility as a change in price would. B. finding equal tax rates that insure quantity demanded does not change. C. equalizing excess burden across all markets. D. moving the same distance in either direction from a starting point on an indifference curve.
If the output gap is constant at minus 2 and the inflation rate has fallen from 6 percent to 5 percent, then next period's short-run aggregate supply curve might be ________
A) ? = 5 - 0.5 (13 - 15) B) ? = 5 + 0.5 (13 - 15) C) ? = 4 + 0.5 (13 - 15) D) ? = 5 + 2 (11 - 15) E) none of the above
A schedule of amounts of a good that people will purchase at various prices during a specific time period holding other factors constant is
A) a market. B) supply. C) demand. D) the market clearing price.