Suppose that Techno Co. produces laptop computers. At a price of $1,000 per laptop, Techno determines that its optimal output is 3,000 laptops per week. If prices are sticky and fears of a
Recession reduce demand for laptop computers, we would expect Techno to
A) reduce output in the long run.
B) reduce output in the short run.
C) raise prices in the short run to compensate for lost revenue.
D) lower prices in the short run to offset the reduced demand.

Question

Quizplus · Accepted Answer

In the short run, Techno Co. will reduce output to adjust to the decreased demand and prevent a surplus of unsold laptops. Since prices are sticky, Techno cannot raise prices to compensate for lost revenue. Instead, they will reduce output to maintain profitability. In the long run, Techno may consider permanently reducing production capacity if the recession persists and demand remains low.

Suppose That Techno Co