Firms That Choose to Use a fiXed-Price Policy

question 129

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:

Dynamic Equilibrium

A situation in which two opposing processes occur at the same rate, leading to no net change in the system.

Products

Substances that are formed as a result of a chemical reaction, appearing on the right side of a chemical equation.

Catalyst

A substance that increases the rate of a chemical reaction without itself undergoing any permanent chemical change.