Question

Consider the following information about menu costs. Menu costsLOADING... are

A. the costs to firms of changing prices.
B. the costs incurred in the short run.
C. the cost of printing a restaurant menu.
D. the same as sunk costs.

Answer 1

The correct answer is option A.

Step-by-step explanation:

Menu costs can be defined as the cost which is incurred by the firms because of changing prices. The size of the menu costs depends upon the type of firm.

There are some costs involved in printing menus, price lists, brochures, catalogs, and price tags, etc.

The concept of menu costs was given by Eytan Sheshinski and Yoram Weiss in 1977. It is used to explain price stickiness in a market.

In case the current price differs from the equilibrium price, the firms will change their price only if the additional revenue from a price change is able to cover menu costs incurred due to price change