Figure: Price Changes The figure (from Global Financial Data, EIA) illustrates in percentage terms how the price of onions (in gray) and crude oil (in black) fluctuate over time. The price of onions clearly fluctuates more than oil. In 1958, the United States Congress banned future markets on onions. How does this historical fact explain the difference in deviation between oil and onions?
A) The ban prevented analysts from buying and selling based on the price of onions' current supply and demand.
B) The ban encouraged speculation on the onion, causing its price to fluctuate widely as different bubbles grew and popped.
C) The ban destroyed any incentive for market participants to understand the onion industry.
D) The ban forced market participants to buy and sell based solely on current supply and demand.

Question

Figure: Price Changes  The figure (from Global Financial Data, EIA) illustrates in percentage terms how the price of onions (in gray) and crude oil (in black) fluctuate over time. The price of onions clearly fluctuates more than oil. In 1958, the United States Congress banned future markets on onions. How does this historical fact explain the difference in deviation between oil and onions?
A) The ban prevented analysts from buying and selling based on the price of onions' current supply and demand. 
B) The ban encouraged speculation on the onion, causing its price to fluctuate widely as different bubbles grew and popped. 
C) The ban destroyed any incentive for market participants to understand the onion industry. 
D) The ban forced market participants to buy and sell based solely on current supply and demand.

Quizplus · Accepted Answer

The ban on future markets prevented analysts from speculating on the future price of onions and forced market participants to buy and sell based solely on current supply and demand. This limitation likely restricted the ability of speculators and traders to drive up the price of onions, resulting in a smaller deviation compared to crude oil.

Figure: Price Changes the Figure (From Global Financial Data