As ﬁrms face reduced demand for their goods and services and they need to reduce their output price, they ﬁnd
A) it's best to renegotiate the rent they pay in order to get enough of a reduction in their per- unit costs.
B) that they can get substantial savings by ﬁnding ways to reduce their raw materials costs rather than cutting their labor force.
C) it's necessary to cut production and their labor force to get any signiﬁcant reduction in per- unit costs.
D) they need to ﬁnd a way to increase the per-unit selling price of their product.
E) None of these choices are correct.

Question

Quizplus · Accepted Answer

When demand decreases and firms need to reduce output prices, they often cut production and labor to achieve significant reductions in per-unit costs.

As ﬁRms Face Reduced Demand for Their Goods and Services