Costco typically has lower prices than its competitors and charges a membership fee. The membership fee is an example of
A)substitution effect
B)consumer surplus
C)compensating variation
D)equivalent variation

Question

Quizplus · Accepted Answer

The membership fee at Costco is an example of compensating variation, where consumers are willing to pay a fee upfront to access lower prices, essentially compensating for the cost difference they would encounter at other retailers without such a fee.

Costco Typically Has Lower Prices Than Its Competitors and Charges