Faced with a Decrease in the Demand for Its Product,a

question 47

Multiple Choice

Faced with a decrease in the demand for its product,a monopolist will lower prices and maintain output at its previous level if

• A)the gain in profit is less than the increase in real wages paid.
• B)the gain in profit is less than the decrease in real wages paid.
• C)the gain in profit is less than the menu costs.
• D)the gain in profit is greater than the increase in menu costs.

---

Definitions:

Unemployment Rate

The percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

Friedman-Phelps

An economic theory associated with Milton Friedman and Edmund Phelps, focusing on the natural rate of unemployment and the relationship between inflation and unemployment.

Actual Inflation

The real rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Natural Rate

The level of any economic factor, such as unemployment or interest rates, that is unaffected by short-term fluctuations and is determined by long-term factors.