Because the future is inherently uncertain, firms often follow rules of thumb to make decisions such as

Question:

Because the future is inherently uncertain, firms often follow

“rules of thumb” to make decisions such as how much capital (factories and machinery for production)

to buy and how to price their products. Examples are financial ratios and markup pricing.

a. Does this behavior make sense?

b. How does uncertainty that firms face encourage firms to use “rules of thumb”?

c. What implications for economic analysis does firms’

use of rules of thumb have? (Post-Keynesian)

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Microeconomics

ISBN: 9781260507140

11th Edition

Authors: David Colander

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