When inflation rises,firms make
A)more frequent price changes.This raises their menu costs.
B)more frequent price changes.This reduces their menu costs.
C)less frequent price changes.This raises their menu costs.
D)less frequent price changes.This reduces their menu costs.

Question

Quizplus · Accepted Answer

When inflation rises, firms tend to make more frequent price changes in order to keep up with the rising costs of production and materials. However, this also means that they incur more menu costs, which are the costs associated with changing prices such as printing new menus, updating online prices, etc. Therefore, choice A is the best answer as it correctly identifies that inflation leads to more frequent price changes but also acknowledges that this raises menu costs.

When Inflation Rises,firms Make