Suppose that Techno TV produces LCD televisions. At a price of $2,000 per television, Techno determines that its optimal output is 3,000 television sets per week. If prices are sticky and fears of a recession reduce demand for LCD televisions, we would
expect Techno to:
A. reduce output in the long run.
B. reduce output in the short run.
C. raise prices in the short run to compensate for lost revenue.
D. lower prices in the short run to offset the reduced demand.
Answer: B
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The Acme Oil Company is a vertically integrated firm. It explores for and extracts crude oil. It also refines the crude oil into gasoline and other products, and sells these products to consumers
The internal price that Acme Oil uses when the crude oil that it extracts is "sold" to one of its refineries is called: A) the shadow price. B) the transfer price. C) the market price. D) the non-market price. E) none of the above
The government, concerned about the wealth redistribution problem caused by the inequality of debt holdings, intervenes by
a. making a special effort to sell bonds to corporations b. creating a proportional income tax system c. sometimes instructing commercial banks to divest some of their bond holdings d. prohibiting the sale of bonds to the Federal Reserve e. limiting the purchase of bonds by foreigners
If the sacrifice ratio is 3, then reducing the inflation rate from 5 percent to 3 percent would require sacrificing
a. 2 percent of annual output. b. 6 percent of annual output. c. 8 percent of annual output. d. 11 percent of annual output.
Gains from trade can only occur when
A) marginal rates of substitutions differ across people. B) marginal rates of substitution are equal across people. C) indifference curves are convex. D) people find themselves on the contract curve.