According to the Menu Cost Theory,firms Will Be Slow in Changing

question 2

Multiple Choice

According to the menu cost theory,firms will be slow in changing their prices because

• A)if prices changed frequently,individuals would reduce their demand for that good because of uncertainty.
• B)frequent price changes would be a sign of monopolistic behaviour.
• C)the cost of changing the price might exceed the additional revenue the price change would generate.
• D)demand for their product would fall because consumers would purchase goods from firms that had not raised their prices.

---

Definitions:

Exchange Transaction

A trade or swap of goods, services, or financial assets in the business or financial markets.

Goodwill

An intangible asset that arises when a company is purchased for more than the fair market value of its net assets, often attributed to reputation, brand, or intellectual property.

Entire Business

The complete operational structure of a company, including all assets, liabilities, operations, and activities.

Natural Resources

Resources that occur naturally in the environment and are utilized for economic gain, such as water, minerals, forests, and fossil fuels.