Reasons Advanced for the Rigidity of Prices to Changes in Demand

question 49

Multiple Choice

Reasons advanced for the rigidity of prices to changes in demand but not changes in costs include

• A) limitations on the information firms can collect and process.
• B) long-term purchasing contracts that fix large components of the cost equation for long periods of time.
• C) the managerial simplicity of stable prices.
• D) the workings, legal and otherwise, of imperfectly competitive markets.
• E) all of the above.

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Definitions:

Productivity

The measure of efficiency in which goods and services are produced, often evaluated by the output per unit of input.