The theory that firms will be slow to change their products' prices in response to changes in demand because there are costs to changing prices is called
A)transactions cost theory.
B)cost-benefit theory.
C)menu cost theory.
D)gift exchange theory.

Question

Quizplus · Accepted Answer

The theory that firms will be slow to change their products' prices in response to changes in demand because there are costs to changing prices is called menu cost theory. This theory suggests that firms must incur some costs to change prices, such as printing new menus or updating computer systems, and these costs may make it less attractive to change prices frequently.

The Theory That Firms Will Be Slow to Change Their