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Questions and Answers
What is the central assumption in the model of the pizza market discussed in the text?
What is the central assumption in the model of the pizza market discussed in the text?
- Prices adjust instantly to changes in supply and demand
- Wages adjust quickly to changing conditions
- Labor contracts set wages for up to three years
- Markets are normally in equilibrium (correct)
How do economists typically view the adjustment of prices in markets?
How do economists typically view the adjustment of prices in markets?
- Prices remain constant for long periods of time
- Prices adjust only annually
- Prices move quickly to balance quantity supplied and quantity demanded (correct)
- Prices adjust slowly to changing conditions
What makes continuous market clearing unrealistic according to the text?
What makes continuous market clearing unrealistic according to the text?
- Prices adjusting instantly to changes in supply and demand
- Magazine publishers changing newsstand prices every few years
- The assumption that all wages and prices are flexible
- Labor contracts setting wages for multiple years (correct)
In reality, which statement best describes the adjustment of many wages and prices?
In reality, which statement best describes the adjustment of many wages and prices?
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What role do labor contracts play in the flexibility of wages according to the text?
What role do labor contracts play in the flexibility of wages according to the text?
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How does the text explain the sticky nature of prices in market-clearing models?
How does the text explain the sticky nature of prices in market-clearing models?
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