Why Is Wage and Price Flexibility an Important Assumption of the Classical

question 88

Multiple Choice

Why is wage and price flexibility an important assumption of the classical model?

• A) Flexible wages and prices guarantee that there will be no scarcity.
• B) Flexible wages and prices allow business firms to fool their workers through the money illusion.
• C) Flexible wages and prices allow business firms to fool their customers through the money illusion.
• D) Flexible wages and prices allow markets to reach equilibrium.

Analyze the financial advantage (disadvantage) of discontinuing a product, service, or segment.

Understand the concept of outsourcing and make-or-buy decisions.

Analyze special orders and determine their financial implications.

Evaluate the use of constrained resources to maximize profitability.

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Definitions:

Outward Shift

A movement of a curve away from the origin on a graph, typically indicating an increase in supply or demand.

Comparative Advantage

The proficiency of an individual or group in executing a certain economic function more effectively than other tasks.

Lowest Cost

The scenario in which the expenditure required to achieve a certain objective or to purchase goods and services is minimized.

Opportunity Cost

The act of sacrificing possible gains from alternative decisions when one is made.