Menu costs refer to the cost that a firm incurs to change prices. These costs can be significant, especially for firms that need to frequently adjust their prices in response to changes in demand, supply or external shocks. Menu costs refer not to the differentiation of prices for different goods, nor to the relative costs of raw materials compared to finished goods.

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Menu Costs Are

Question 9

Multiple Choice

Menu costs are

A) very small costs.
B) the cost of differentiating prices for different goods.
C) the relative cost of raw materials compared to finished goods.
D) the cost of changing prices.

Correct Answer: