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

Question

Quizplus · Accepted Answer

Price stickiness can result from adjustment costs associated with changing prices, as well as explicit long-term contracts that set prices. While worker unions may contribute to price stickiness, this is not the only or primary reason for it. Therefore, choices I and III best explain price stickiness.

Which of the Following Is an Explanation for Price Stickiness