Which of the following best explains why prices tend to be inflexible even when demand changes?
A)Government regulations limit the number of times a firm can change prices in a year.
B)In most industries the profit-maximizing price does not change even when demand changes.
C)Production costs do not tend to change when a firm varies its level of output.
D)Firms may be reluctant to change prices for fear of setting off a price war or losing customers to rivals.

Question

Quizplus · Accepted Answer

Firms may be reluctant to change prices due to the potential negative consequences such as triggering a price war or losing customers to competitors, leading to price inflexibility.

Which of the Following Best Explains Why Prices Tend to Be