Wholesale clubs charge a fixed monthly fee but then offer goods at discount prices.For purposes of this question, suppose a wholesale club and a supermarket offer the same composite grocery item, with the supermarket charging no fixed fee but a higher price for the item.(Assume no corner solutions.)

Question

Quizplus · Accepted Answer

(A) is true because customers at the wholesale club are paying a fixed fee regardless of the quantity of items they purchase, so they are more likely to be less sensitive to the marginal cost of each item.

(B) is true because if someone is indifferent between the two stores, they would choose the one that offers goods at a lower cost, which is the wholesale club.

(C) is true because utility is subjective and cannot be measured objectively. However, this is not the only correct answer to this question.

Therefore, both (A) and (B) are true, and the answer is (D).

Wholesale Clubs Charge a Fixed Monthly Fee but Then Offer