If the Producer of a Product Has Entered into a Fixed

Multiple Choice

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.