When fiRms Face Reduced Demand for Their Goods and Services

question 68

Multiple Choice

When firms face reduced demand for their goods and services during recessions, behavioral economics suggests that the firm should

• A) cut production and lay off workers according to the percent decline in sales.
• B) explain to the workers that in order to make it through the recession, they all need to take a pay cut.
• C) shut down until the recession is over.
• D) increase morale by increasing production and hiring more workers.
• E) reduce pay just for the salaried employees, not the hourly production workers.

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Definitions:

Respondent Behavior

Refers to behavior that occurs as an automatic response to a certain stimulus.

Positive Self-Concept

An individual's positive assessment of themselves, encompassing beliefs about self-worth, capabilities, and attributes.

Worker Productivity

A measure of the efficiency of a worker or a group of workers, often quantified as the amount of work produced over a defined period of time.

Consumer Buying Habits

The patterns and behaviors exhibited by individuals when purchasing goods and services, often influenced by psychological, social, and economic factors.