Which of the Following Statements Best Describes How Firms Respond

question 60

Multiple Choice

Which of the following statements best describes how firms respond to demand shocks under conditions of inflexible prices?

• A)Firms respond to shorter-term demand shocks by adjusting production levels; more persistent changes in demand result in changes in inventories.
• B)Firms respond to shorter-term demand shocks by adjusting inventories; more persistent changes in demand result in changes in production levels.
• C)Firms are reluctant to adjust inventory levels because the costs are higher than changing the quantity of output produced.
• D)Firms are quick to let go of workers when negative demand shocks occur.

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Definitions:

Artisan's Lien

A legal claim granted to artisans or mechanics against the property they have serviced or improved, ensuring payment for their work.

Real Property

Land and anything permanently attached to it, such as buildings and fixtures, legally recognized as immovable.

Consensual Lien

A security interest that is agreed upon by the debtor and creditor to secure payment or performance of an obligation.

Mechanic's Lien

A legal claim against a property by a worker or supplier who has not been paid for services provided.