Say that Japanese firms commit not to lay off their employees when demand for their products is low, but American firms often lay off workers when demand is low.As a result, ceteris paribus, we would expect Japanese firms to:

Question

Quizplus · Accepted Answer

Japanese firms committing not to lay off employees during low demand means that they may continue to produce even when prices are low, and demand is uncertain. Therefore, they are likely to continue production at prices at which American firms may shut down production, leading to relatively greater variable costs for Japanese firms. Thus, we would expect Japanese firms to continue production at some prices at which American firms would shut down.

Say That Japanese Firms Commit Not to Lay Off Their