Frito Lay Experienced a 20% Drop in Its Sales

question 116

Multiple Choice

Frito Lay experienced a 20% drop in its sales. Even though the demand for its product decreased, Frito Lay did not cut the wages of its nonunionized workers. This is an example of

• A) an explicit contract not to cut wages.
• B) employment-at-will.
• C) poor management.
• D) an implicit or social contract not to cut wages.

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Definitions:

Homogeneous Products

Goods that are perfect substitutes for each other; they are identical in quality, function, and appearance.

Mutual Interdependence

A situation in a market where the actions of one firm significantly impact the profitability of other firms within the same market.

Barriers to Entry

Obstacles that make it difficult for new competitors to enter a market, including high startup costs, strict regulations, or strong incumbents.

Excess Capacity

The situation where a firm or economy can produce more goods or services than currently produced, indicating under-utilization of resources.