The Fact That Some Resource Prices Are Fixed by Contracts

question 93

Multiple Choice

The fact that some resource prices are fixed by contracts helps explain why firms _____

• A) increase output in the short run when the price level increases.
• B) keep production levels constant in the short run when the price level decreases.
• C) sell output in the short run at fixed prices.
• D) increase output in the long run when the price level increases.
• E) decrease production when nominal wages fall in the long run.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to run its day-to-day operations.

Current Liabilities

Obligations that are due within one year or within the normal operating cycle of the business, whichever is longer.

Days' Sales In Inventory

Days' Sales in Inventory is a financial ratio that indicates the average time in days that a company takes to turn its inventory into sales.

Sales On Account

Transactions where goods or services are sold and payment is to be made at a later date, often recorded as accounts receivable.