If Firms Are Price Setters,a Small Decline in the Demand

question 94

Multiple Choice

If firms are price setters,a small decline in the demand for their outputs will cause them to

• A)reduce price and reduce the level of output produced.
• B)reduce output in the short run, but reduce price in the long run.
• C)reduce price in the short run, but reduce output only in the long run.
• D)increase price in the short run to offset the effect on profits of a decline in output.

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Definitions:

Physiological

Relating to the branch of biology that deals with the normal functions of living organisms and their parts.

Personal

Relating to or affecting an individual directly; not related to or representative of anything larger or external to oneself.

Psychological

Pertaining to the mind and mental processes, influencing or influenced by emotional and cognitive factors.

Maslow Hierarchy

A psychological theory proposed by Abraham Maslow, categorizing human needs into five levels ranging from basic (such as physiological needs) to higher needs (like self-actualization).