Which of the following scenarios would cause a speculator in chicken and beef futures to use a ―buy low and sell high‖ strategy for chicken?
A) A report emerges from the Surgeon General that eating red meat in moderate amounts allows for increased brain power.
B) Cows are found to be infected with ―Mad Cow Disease‖ and must be destroyed.
C) Households begin eating more meals at restaurants.
D) Chickens are found to spread the Avian Flu disease among humans.

Question

Quizplus · Accepted Answer

If cows are infected with "Mad Cow Disease" and must be destroyed, the supply of beef would decrease, potentially increasing its price. This could lead to increased demand for chicken as an alternative, causing chicken prices to rise. A speculator would buy chicken futures at a lower price before the price increase and sell them at a higher price later.

Which of the Following Scenarios Would Cause a Speculator in Chicken