Crucial Assertions in the Menu-Cost Literature Are That Those Costs

question 20

Multiple Choice

Crucial assertions in the menu-cost literature are that those costs ________ be large for them to have an effect on firms' pricing,while potential total welfare losses ________ menu costs that have been avoided.

• A)need not,may be several times larger than
• B)need not,are generally much less than
• C)must,may be several times larger than
• D)must,are generally much less than

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Definitions:

Production Possibilities

The various combinations of goods and services that can be produced in an economy with a given set of resources and technology.

Absolute Advantage

A situation where a producer can produce more goods using the same amount of resources or less than other producers.

Production Possibilities

A graphical representation of the maximum number and combinations of goods and services that can be produced from a fixed set of resources.

Absolute Advantage

A situation where a country, individual, or firm can produce more of a good or service with the same amount of resources compared to other entities.