According to prospect theory, firms are more likely to shrink packages than raise prices because:
A. consumers feel the loss of a price increase more than they feel the loss of buying a smaller
package for their money.
B. they don't understand that consumers recognize price increases easily, regardless of what
form they take.
C. consumers associate smaller packages with higher quality luxury goods.
D. consumers are generally trying to downsize their purchases and lead simpler lives.
Answer: A
You might also like to view...
Explain the difference between consumption and capital goods
What will be an ideal response?
Which is the most popular tool of the Fed used to control the stock of money?
A) Manipulating reserve requirements. B) Buying and selling government bonds. C) Manipulating the discount rate. D) Issuing new U.S. Treasury bonds.
If a government's income tax receipts exceed its expenditures, the government is running a
A) surplus and is a net borrower of funds. B) surplus and is a net saver of funds. C) deficit and is a net borrower of funds. D) deficit and is a net saver of funds.
What would happen to U.S. economic welfare if the U.S. eliminated tariffs on solar panel imports?
a. U.S. economic welfare would increase because of the social gains from increased U.S. consumption of solar panels. b. U.S. economic welfare would decrease because the social gains from increased U.S. consumption of solar panels would be less than the social costs inflicted on U.S. solar panel producers. c. U.S. economic welfare would decrease because the social gains from increased U.S. production of solar panels would be less than the social costs associated with increased U.S. consumption of solar panels. d. U.S. economic welfare would increase because the social gains from increased U.S. production of solar panels would exceed the social costs associated with increased U.S. consumption of solar panels.