Firms That Choose to Use a Fixed-Price Policy

question 176

Multiple Choice

Firms that choose to use a fixed-price policy

• A)will tend to experience larger inventory changes than firms that follow a flexible-price policy.
• B)will tend to experience smaller inventory changes than firms that follow a flexible-price policy.
• C)find that their inventories do not respond to demand shocks.
• D)will not hold inventories.

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Definitions:

Industry Entry

The process by which new competitors join an existing market, often leading to increased competition.

Profit Circumstances

Conditions or situations that influence the profitability of a business or investment.

Monopolistically Competitive

A market structure where many companies sell products that are similar but not identical, allowing for significant influence over pricing.

Short-Run Equilibrium

A state in the economic short term where demand equals supply, and there are no external forces prompting change.