Which of the Following Is an Explanation for Price Stickiness

question 119

Multiple Choice

Which of the following is an explanation for price stickiness?
I. There are adjustment costs associated with changing prices such as the cost of printing new price lists.
II. Worker unions may forbid firms from raising prices for fear that workers may be laid off if demand for output falls.
III. Firms may have explicit long-term contracts to sell their products to other firms at specified prices.

• A) I only
• B) I and II only
• C) I and III only
• D) I, II, and III

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Definitions:

Tariffs

Taxes imposed on imported goods aimed at making them more expensive than similar locally-produced goods to protect domestic industries from foreign competition.

Consumers

People or collectives who buy products and services for their own consumption.

Producers

Individuals or organizations that create goods or services to satisfy market needs.

Embargo

A government order restricting or prohibiting trade and commerce with a specific country or the exchange of specific goods.