Refer to the Graphs

question 218

Multiple Choice

Refer to the graphs. Suppose a firm is currently producing 500 computers per week and charging a price of $1,000. How will the firm respond to a positive demand shock if prices are inflexible?

• A) The firm will increase production to 650 computers per week and charge a price of $1,000.
• B) The firm will continue to produce 500 computers per week and charge a price of $1,000.
• C) The firm will cut production to 300 computers per week and charge a price of $1,000.
• D) The firm will cut production to 300 computers per week and charge a price of $600.

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Definitions:

Basing-Point Pricing

Selecting one or more geographical locations (basing point) from which the list price for products plus freight expenses are charged to the buyer.

Uniform Delivered Pricing

A pricing strategy where a company charges the same shipping price to all customers, regardless of their geographic location.

Transportation Costs

Expenses associated with the movement of goods or materials from one location to another, which can include freight charges, warehousing, and handling fees.

Fixed Allowance

A predetermined amount of money provided regularly, often for specific purposes like travel expenses, without the need to account for actual expenses.