When fiRms Face Reduced Demand for Their Goods and Services

Multiple Choice

When firms face reduced demand for their goods and services during recessions, behavioral economics suggests that the firm should

A) cut production and lay off workers according to the percent decline in sales.
B) explain to the workers that in order to make it through the recession, they all need to take a pay cut.
C) shut down until the recession is over.
D) increase morale by increasing production and hiring more workers.
E) reduce pay just for the salaried employees, not the hourly production workers.