A farmer growing cocoa beans enters into a contract with a chocolate factory. According to the contract, the chocolate factory will buy a ton of cocoa beans from the farmer at the price of $2,200 per ton next month. A day after the contract is signed the price of cocoa beans falls to $2,000 per ton. If the farmer and the chocolate factory go ahead with the contract:
A) the farmer will have lost $200.
B) the chocolate factory will have lost $200.
C) the farmer will have lost $2,000.
D) the chocolate factory will have lost $2,200.

Question

Quizplus · Accepted Answer

The chocolate factory will have lost $200 because they are obligated to buy the cocoa beans at the agreed price of $2,200 per ton, which is $200 more than the current market price of $2,000 per ton.

A Farmer Growing Cocoa Beans Enters into a Contract with a Chocolate