Question

Which of the following statements about price wars is true?Multiple Choice a. Firms that have to deal with the possibility of price wars often have extremely flexible prices. b. Firms that do not have to deal with the possibility of price wars often have sticky prices. c. Price wars tend to increase the short-run flexibility of prices. d. Firms that have to deal with the possibility of price wars often have sticky prices.

Answer 1

Answer:

d. Firms that have to deal with the possibility of price wars often have sticky prices.

Explanation:

Prices are one of the key factors for the demand and supply in any economy.

If the prices are favorable to producers, it is benefit to them, and then they supply a high quantity, whereas the demand decreases.

When a firm tends to believe to have some price wars, basically not the price the supplier wants, or the industry is against the price determined by the supplier then, the firm chooses to use stick price. That the price do not fluctuate, and gets fixed with as the firm is not ready to supply below a certain level of price.