Mount Albion Financial Planning uses the services of Food-to-Go, which runs the employee cafeteria in the building and also caters business meetings at a discounted rate because of the volume of business it does with Mount Albion. The other available cafeteria services do not provide catering. In this case, if Mount Albion decides to terminate Food-to-Go's contract and shift to some other service, it is likely to create _____.
A)high employment costs
B)redemption costs
C)favorable quality status
D)complementary products
E)high switching costs

Question

Quizplus · Accepted Answer

Switching costs are fixed costs buyers face if they change suppliers. In this case, if Mount Albion terminates Food-to-Go and hires a new service, Mount Albion would incur high switching costs, because it would have to hire a separate caterer at nondiscounted rates.

Mount Albion Financial Planning Uses the Services of Food-To-Go, Which