You work as a forecaster for a luxury automobile manufacturer. You know that there is a strong positive relationship between the demand for luxury automobiles and income levels. The government issues a report predicting that it expects income levels to increase steadily over the next 5 years. All else equal, which of the following courses of action would you recommend to the firm?
A. Don't change the amount of investment made, but raise the price of luxury automobiles in response to the expected increase in the demand.
B. Start to increase investment now so that when income levels increases and the demand for luxury automobiles increases, the firm will be able to meet the new demand.
C. Suggest that the firm curtail its advertising to avert a substantial increase in demand for luxury automobiles.
D. Suggest that the firm make an investment in new capital to produce luxury automobiles only after it can verify an increase in income levels.
Answer: B
You might also like to view...
Define the following four references and name a country that you argue would fall into each category
(a) First World (b) Second World (c) Third World (d) Fourth World
Self- reinforcing mechanisms that cause the poor to stay poor are called:
A. poverty traps. B. societal traps. C. social networks. D. social aberrances.
If an economy's depreciation is greater than its gross investment, then
A) net investment is negative and saving is negative. B) net investment is positive and saving is positive. C) net investment must equal saving. D) the economy's capital stock decreases. E) net investment is positive and saving is negative.
Refer to Scenario 18.1. When Curly made the loans to Moe, Larry, and Shemp, there were 500 coins' worth of receipts. These receipts are best described as
A) commodity money. B) representative commodity money. C) partially backed representative commodity money. D) fiat money.