According to the menu cost theory, firms will be slow in changing their prices because
A) if prices changed frequently, individuals would reduce their demand for that good because of uncertainty.
B) frequent price changes would be a sign of monopolistic behavior.
C) the cost of changing the price might exceed the additional revenue the price change would generate.
D) demand for their product would fall because consumers would purchase goods from firms that had not raised their prices.
C
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The quantity theory of money and prices rests on the assumption that
A) the minimum wage is constant. B) the velocity of money is constant. C) the nominal interest rate is constant. D) the foreign exchange rate is constant.
Explain the difference between a negative production externality and a negative consumption externality
What will be an ideal response?
The substitution effect argues that a consumer
A. will always use the additional purchasing power from a price decrease to purchase more of both goods. B. will not purchase more of a good when its price falls. C. will purchase less of both goods if his or her real income increases. D. will purchase more of a good that has become relatively cheaper, and less of a good that has become relatively more expensive.
The ________ the Herfindahl-Hirschman Index, the ________
A) lower; more concentrated the industry B) higher; more concentrated the industry C) higher; less concentrated the industry D) lower; higher the profits earned in the industry