Which of the following is a method firms can use to counteract price fluctuations and eliminate income risk?
A) Manufacture all needed inputs internally
B) Acquire upsteam firms in the vertical chain
C) Enter into futures contracts to hedge the price of raw materials
D) Eliminate competitors by under-cutting their price
E) None of the above

Question

Quizplus · Accepted Answer

By entering into futures contracts, firms can lock in a set price for raw materials and eliminate the risk of price fluctuations. Option A is not feasible or practical for all firms. Option B can be costly and may not eliminate all price fluctuations. Option D is not a sustainable or ethical method for managing price risk.

Which of the Following Is a Method Firms Can Use