Firms that choose to use a ﬁxed-price policy
A) will tend to experience larger inventory changes than ﬁrms that follow a ﬂexible-price policy.
B) will tend to experience smaller inventory changes than ﬁrms that follow a ﬂexible-price policy.
C) ﬁnd that their inventories do not respond to demand shocks.
D) will not hold inventories.

Question

Quizplus · Accepted Answer

Firms that use a fixed-price policy are less able to adjust prices in response to changes in demand, leading to larger inventory fluctuations as they must adjust the quantity of goods instead to balance supply and demand.

Firms That Choose to Use a ﬁXed-Price Policy