Crucial assertions in the menu-cost literature are that those costs ________ be large for them to have an effect on firms' pricing,while potential total welfare losses ________ menu costs that have been avoided.
A)need not,may be several times larger than
B)need not,are generally much less than
C)must,may be several times larger than
D)must,are generally much less than

Question

Quizplus · Accepted Answer

The menu-cost literature posits that the costs associated with changing prices (menu costs) do not have to be large to impact firms' pricing decisions. Additionally, it suggests that the potential total welfare losses due to not changing prices can be several times larger than the menu costs that were avoided by not making the change.

Crucial Assertions in the Menu-Cost Literature Are That Those Costs