Menu costs ________.
A)are the cost a firm bears when it changes its prices
B)are one source of price stickiness because changing prices involves many hidden costs
C)are one source of price stickiness because firms may not want to change their "menus" too often and risk alienating customers
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Menu costs are the costs incurred by firms when they change their prices. As a result, changing prices involves many hidden costs, which are one source of price stickiness. Moreover, firms may avoid changing their "menus" too often due to the risk of alienating customers. Therefore, all of the above options are valid explanations of menu costs.

Menu Costs ________