The best way for a large hospitality firm to hedge a price increase in a commodity would be to
A)do nothing and hope the price will decrease.
B)dramatically increase the price on your menu.
C)buy a futures contract.
D)buy a lot of the product now from a local purveyor with a lot of cash.

Question

Quizplus · Accepted Answer

Buying a futures contract allows the firm to lock in a price for the commodity, effectively hedging against price increases. This is a common strategy used by many large companies in the hospitality industry to manage price risk.

The Best Way for a Large Hospitality Firm to Hedge