What are sticky prices, and how can contracts make them "sticky"?
What will be an ideal response?
Prices or wages are said to be "sticky" when they do not respond quickly to changes in demand or supply. Contracts are legal agreements between the firm and another party that establishes a particular price to be paid over a period of time. For example, a union contract is a legal agreement between the firm and the union that workers are to be paid a certain wage. If conditions change over the contract period, the firm still must pay the wage agreed upon in the contract. That can make this firm's wages sticky. Firms also buy raw materials on contract. This fixes the price at which the firm buys the raw material over the contract period, so it also becomes a sticky price.
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A monopsonist is
a. a buyer who faces an upward-sloping supply curve. b. a buyer who faces a downward-sloping supply curve. c. a seller who faces an upward-sloping demand curve. d. a seller who faces a downward-sloping demand curve.
Tom & Jerry are running Hanna Barbera's lemonade stand as two profit centers. Tom makes the lemonade while Jerry sells it. Jerry argues that Tom is transferring the lemonade to him priced too high, which forces him to charge the customers a high price, losing sales. Does the decision maker have the information to make a good decision?
a. Yes b. No c. Uncertain d. None of the above
Natural monopolies are the natural result of:
A. competition in markets where economies of scale exist over the relevant range of output. B. geographical happenstance. C. fierce competition from firms in a market. D. government regulations intended to encourage competition.
Which statement best defines efficiency?
a. when it becomes possible to benefit at least one party without imposing costs on others b. when it is impossible to improve the situation of one party without imposing a cost on another c. the amount that a seller is paid for a good minus the seller’s actual cost d. the amount that individuals would have been willing to pay, minus the amount that they actually paid