Refer to the Graphs

question 8

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 negative demand shock if prices are flexible?

• A) The firm will continue to produce 500 computers per week and charge a price of $600.
• B) The firm will continue to produce 500 computers per week and charge a price of $1,200.
• 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:

Sales Commissions

Payments made to sales staff based on the value of the sales they have made, typically a percentage of the sales amount.

Selling Expenses

Costs associated with the marketing and selling of a company's products or services.

Shipping Expenses

Costs incurred in transporting goods from one location to another, including freight and packaging fees.

Production Estimates

Forecasts or predictions about the quantity of products that will be produced over a specific period.