Question

Molly and Tom are getting married. Last month they hired a caterer for the wedding reception. This month they attended a wedding for which their chosen caterer had provided food, dishes and flowers. Neither thought the food was good and Molly worried that the dishes looked cheap. However, they feel they cannot change caterers at this date due to the large deposit required by the catering company when it took the job. Molly and Tom do not want to pay:

A. Extraneous expenses
B. Opportunity costs
C. Switching costs
D. Fixed costs
E. Retained costs

Answer 1

Molly and Tom are reluctant to change caterers despite being unsatisfied because they want to avoid 'switching costs'. These are expenses from changing plans that would come in addition to losing the deposit they already paid.

Step-by-step explanation:

Molly and Tom do not want to incur switching costs, which are expenses that would be incurred by changing their plans, specifically by hiring a new caterer for their wedding reception. The large deposit they paid to their current caterer represents a barrier to making a change, as they would lose this money if they decided to switch to another company. Switching costs are common in many business decisions and include various financial, time, and effort related expenses associated with making a change from one product, service, or vendor to another.

The subject of the question is Business and the grade level is High School.

The answer to the question is C. Switching costs. Switching costs refer to the expenses or inconveniences incurred when changing suppliers or service providers. In this case, Molly and Tom feel they cannot change caterers due to the large deposit required, which would be a switching cost.

Examples of switching costs include termination fees, retraining employees, or investing in new equipment or software.