If the producer of a product has entered into a ﬁxed price sale agreement for that output, the producer faces:
A)a nice steady proﬁt because the output price is ﬁxed.
B)an uncertain proﬁt if the input prices are volatile.This risk can be reduced by a short
Hedge.
C)an uncertain proﬁt if the input prices are volatile.This risk can be reduced by a long
Hedge.
D)a modest proﬁt if the input prices are stable.This risk can be reduced by a long hedge.
E)a modest proﬁt if the input prices are stable.This risk can be reduced by a short hedge.

Question

Quizplus · Accepted Answer

The Answer of If the producer of a product has entered into a ﬁxed price sale agreement for that output, the producer faces:
A)a nice steady proﬁt because the output price is ﬁxed.
B)an uncertain proﬁt if the input prices are volatile.This risk can be reduced by a short
Hedge.
C)an uncertain proﬁt if the input prices are volatile.This risk can be reduced by a long
Hedge.
D)a modest proﬁt if the input prices are stable.This risk can be reduced by a long hedge.
E)a modest proﬁt if the input prices are stable.This risk can be reduced by a short hedge.

If the Producer of a Product Has Entered into a ﬁXed