Which of the following statements about price wars is true?
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.

Question

Quizplus · Accepted Answer

Price wars often lead to a situation where firms have to cut their prices rapidly to compete with their rivals. This can result in firms having to deal with the possibility of price wars having sticky prices, meaning they have difficulty adjusting their prices quickly.

Which of the Following Statements About Price Wars Is True