Question 19(1 point)

Which of the following statements is true?

a

More regulation increases per-unit production costs for businesses and shifts the AS curve to the left. Deregulation reduces per-unit production costs and shifts the AS curve rightwards.

b

If AD decreases, arecessionmay ensue and cyclical unemployment could result, since prices don't fall easily.

c

Prices are downward sticky for several reasons, including fear of price wars, menu costs, and wage contracts.

d

All of the above.

e

Only a) and b)

Question 20(1 point)

Which of the following statements is true?

a

Fear of price warskeeps prices from being reduced. Firms fear that if they reduce their price, their rivals may reduce their price even more, which could result in a "price war" (successively deeper and deeper price cuts that result in reduced profits for all of the firms).

b

Menu costsdiscourage repeated price changes. Menu costs are the costs businesses incur from printing new price lists or catalogs, re-pricing inventory, and communicating new prices to customers.

c

Large parts of the workforce are underwage contractsthat are not flexible, therefore firms cannot afford to reduce their prices.

d

All of the above.

e

Only a) and b)

Question 21(1 point)

Which of the following statements is true?

a

Employers are reluctant to cut wages because of the negative impact on employee morale, effort, and productivity.

b

Employers seek to payefficiency wages(wages that maximize work effort and productivity, and thus minimize production costs).

c

Theminimum wage lawsets a legal maximum wage for low-skilled labor.

d

All of the above.

e

Only a) and b)