Suppose That the Owner of a Local Ice Cream Store

question 13

Multiple Choice

Suppose that the owner of a local ice cream store, knowing that demand for ice cream is higher when the weather is warmer, always charges a price in cents for a scoop of ice cream that is equal to two times the current outdoor temperature, measured in Fahrenheit (so that if it is 90 degrees outside, the ice cream is $1.80 per scoop) . This type of behavior is ________.

• A)exactly the type of behavior that Keynes believed most firms exhibit
• B)known as meeting demand
• C)inconsistent with the key assumption upon which the basic Keynesian model is built
• D)free from menu costs

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Definitions:

Amortization

The process of gradually writing off the initial cost of an asset over a period.

Bondholders

Investors or entities that hold debt securities, especially bonds, issued by corporations or governments, entitling them to interest payments and the return of principal.

Issuing Corporation

The company or entity that offers securities, like stocks or bonds, for sale to investors in order to raise capital.

Creditors

Individuals or entities to whom money is owed by another individual or entity, typically due to a loan or credit arrangement.