Which of the following is a reason that a company's input prices can be inflexible for a period of several years?
Multiple choice question.
Large parts of the labor force work under contracts prohibiting wage cuts for the duration of the contract.
Employers are not willing to pay their workers higher wages even if prices increase.
Wages and salaries of nonunion workers are usually adjusted once a year.
1 answer
The correct answer is:
Large parts of the labor force work under contracts prohibiting wage cuts for the duration of the contract.
This option highlights a structural reason why input prices, specifically wages, can be inflexible for an extended period. Contracts often lock in wage levels, preventing reductions even if economic conditions change.
