A New Keynesian firm chooses
A)its selling price and how much it sells at that price.
B)its selling price but not how much it sells at that price.
C)how much it sells but not the selling price.
D)neither how much it sells nor the selling price.

Question

Quizplus · Accepted Answer

A New Keynesian firm has pricing power, which means it can set its own selling price. However, it cannot control the quantity demanded at that price, as this is determined by the market. Therefore, the firm can choose its selling price but not how much it sells at that price.

A New Keynesian Firm Chooses