Some Economists Suggest That Because of the Costs of Negotiating

question 39

Multiple Choice

Some economists suggest that because of the costs of negotiating contracts, printing price lists, etc., it is costly for firms to change prices in response to demand changes. This hypothesis is known as the

• A) sticky wage theory.
• B) menu cost theory.
• C) Phillips theory.
• D) rational expectations theory.

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Definitions:

Workforce Size

The total number of employees, both full time and part time, engaged in an organization or available in the market.

Equipment Used

Equipment used refers to the tools, machinery, and devices employed in the execution of a specific task or operation.

Productivity

The measure of how efficiently production inputs, such as labor and materials, are converted into outputs, or goods and services.

Demand

The quantity of a product or service that consumers are willing and able to purchase at various prices during a given period of time.