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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If a perfectly competitive market is in long-run equilibrium and there is a permanent decrease in demand, then
A) some firms will incur economic losses. B) firms are no longer maximizing profits. C) some firms must immediately exit. D) each firm must produce less output in the new long run equilibrium and earn less economic profit.
Illustrate with a graph the effects of fiscal policy when exchange rates are fixed
What will be an ideal response?
The research of William Shepherd suggests that since World War II, the three main reasons for increased competition in U.S. industries are international trade, deregulation, and antitrust activity
a. True b. False
Using the information in the table shown, what is the 2009 value of the salary listed in 1979?
A. $127,828
B. $14,643
C. $57,824
D. $504,766