In the face of rising costs, some firms reduce the quality of the goods they produce rather than maintain quality and increase prices. How would behavioral economics explain this strategy?
A. People have an aversion to losses, and consumers are more likely to feel the loss of a
price increase than a quality reduction.
B. Consumers are more tolerant of diminished quality because diminishing marginal utility
causes people to get rid of goods sooner than in the past.
C. Firms are myopic in their decision making, with little regard for future profitability.
D. The availability heuristic will cause people to buy whatever is offered, regardless of the
quality.
Answer: A
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Which of the following goals are part of the monetary "trilemma"?
a. predictable exchange rates, free movement of capital, and autonomous monetary policy b. rising exchange rates, free movement of capital, and nationalist monetary policy c. predictable exchange rates, autonomous monetary policy, and protectionist trade policy d. protectionist trade policy, free movement of capital, and rising exchange rates
The short-run tradeoff between the unemployment rate and the inflation rate shown by the Phillips curve is represented in the AS-AD model by
A) rightward shifts of the aggregate supply curve. B) the downward-sloping aggregate demand curve. C) the upward-sloping aggregate supply curve. D) the vertical potential GDP line. E) leftward shifts of the aggregate supply curve.