Firms That Face Menu Costs React to a Sustained Increase

question 30

Multiple Choice

Firms that face menu costs react to a sustained increase in demand by:

• A)increasing output and then raising the price of their output.
• B)charging higher prices, without necessarily increasing the amount of output they are willing to sell.
• C)charging lower prices, while simultaneously increasing the amount of output they are willing to sell.
• D)increasing output and then reducing the price of their output.

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Definitions:

Time-Phased Product Structure

A detailed breakdown that shows the timeline on which components must be assembled or produced to complete a final product.

Bill of Material

A comprehensive list of raw materials, assemblies, and sub-assemblies needed to manufacture or repair a product or service.

Lead Times

The total time that elapses between the initiation of a process and its completion, often critical in manufacturing, supply chain management, and project planning.

Lot-For-Lot

Lot-for-lot ordering is an inventory management technique where the order quantity is set equal to the demand for the next period, optimizing inventory levels and reducing holding costs.