Which of the Following Statements Best Describes How Firms Respond

question 60

Multiple Choice

Which of the following statements best describes how firms respond to demand shocks under conditions of inflexible prices?

• A)Firms respond to shorter-term demand shocks by adjusting production levels; more persistent changes in demand result in changes in inventories.
• B)Firms respond to shorter-term demand shocks by adjusting inventories; more persistent changes in demand result in changes in production levels.
• C)Firms are reluctant to adjust inventory levels because the costs are higher than changing the quantity of output produced.
• D)Firms are quick to let go of workers when negative demand shocks occur.

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Definitions:

Kirchhoff's Voltage Law

A principle in electrical engineering that states the sum of electrical potential differences around any closed network is zero.

New Netherland

A 17th-century colonial province of the Dutch Republic that included parts of what are now the northeastern United States.

Hudson River

A river in New York, United States, known for its historical significance and beauty, running from the Adirondack Mountains to New York City.

Gulf Coast

Refers to the coastline along the Gulf of Mexico, embraced by states like Florida, Alabama, Mississippi, Louisiana, and Texas, known for its unique cultural heritage and natural beauty.