If It Is Costly for a Firm to Adjust Its

question 10

Multiple Choice

If it is costly for a firm to adjust its employment level rapidly,the firm faces

• A) a positive labor demand elasticity.
• B) linear adjustment costs.
• C) concave adjustment costs.
• D) convex adjustment costs.
• E) lumpy adjustment costs.

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Definitions:

Optimal Average Cash Balance

The ideal level of cash a company seeks to maintain to minimize the costs associated with holding too much or too little cash.

Weekly Interest Rate

Interest calculated and applied on a weekly basis, often referred to in terms of loans or savings.

BAT Model

Behaviorally Adjusted Time (BAT) Model refers to a calculation method designed to account for the inefficiencies human behavior introduces into the financial markets.

Optimum Initial Cash Balance

The ideal amount of cash a company needs on hand to operate efficiently without incurring excess costs or missing out on opportunities.