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. 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.
B. Don't change the amount of investment made, but raise the price of luxury automobiles in response to the expected increase in the 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: A
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Which of the following industries has not undergone deregulation in recent years?
a. steel b. telephone c. airlines d. trucking e. banking
Which product will have the most elastic demand curve?
A. Thread B. Heating oil C. A new automobile D. Cigarettes
In all cases, microeconomics deals with
A) what is. B) what should be. C) relatively small units in the economy. D) the entire economy.
The long run is defined as a time period during which full adjustment can be made to any change in the economic environment. Thus in the long run, all factors of production are variable. Long-run curves are sometimes called planning curves, and the long
run is sometimes called the A) foreseeable future. B) minimum efficient time period. C) non-adjustment period. D) planning horizon.