Output price risk is:
A) when a change in the commodity market unfavorably affects the price at which a firm can buy their raw materials
B) when a change in the commodity market unfavorably affects the price at which a firm can sell their products
C) taking two positions whose gains and losses will offset each other
D) when a company sells its products abroad and there is an unfavorable exchange rate movement

Question

Quizplus · Accepted Answer

Output price risk refers to the risk that a change in the commodity market unfavorably affects the price at which a firm can sell their products. It is also known as sales price risk or price risk. Option A refers to input price risk, where the risk is related to the price of raw materials that a company needs to purchase. Option C refers to hedging, where a company takes two opposing positions to offset gains and losses. Option D refers to exchange rate risk, which is different from output price risk.

Output Price Risk Is