Suppose that you have wheat in storage and that the price of wheat is currently $5.00 per bushel. You can sell your wheat immediately but you also have an opportunity to sell in six months. At that time, you believe the price of wheat will be $5.60 per bushel. Your cost of storage is $0.75 per bushel for six months. One dollar in six months is worth one dollar today (no discounting). What strategy is profit maximizing?
A. Hold onto your wheat and sell in six months.
B. Sell your wheat today.
C. Minimize your losses by exiting the wheat market.
D. Expand production to sell more wheat.
Ans: B. Sell your wheat today.
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According to a study of the price elasticities of products sold in supermarkets, the price elasticity of demand for toothpaste is estimated at -0.45. Which of the following could explain why the price elasticity of demand for toothpaste is so low?
A) Toothpaste is heavily endorsed by dentists. B) Toothpaste is relatively inexpensive. C) There are few close substitutes for toothpaste. D) The toothpaste industry is highly competitive.
Today U.S. protectionism is concentrated in
A) high-tech industries. B) labor-intensive industries. C) industries in which Japan has a comparative advantage. D) computer intensive industries. E) capital-intensive industries.