Multiple Choice
Which of the following best explains how the U.S. economy creates and destroys millions of jobs each year?
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1. Introduction to Macroeconomics
Introduction to Economics
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In macroeconomics, what name is given to the costs that businesses incur when changing their prices?
A
Marginal costs
B
Sunk costs
C
Opportunity costs
D
Menu costs
Verified step by step guidance1
Understand the context: The question asks about the specific type of costs businesses face when they change their prices in macroeconomics.
Recall the definitions of the options: Marginal costs are the additional costs of producing one more unit; sunk costs are costs that have already been incurred and cannot be recovered; opportunity costs represent the value of the next best alternative foregone.
Identify the relevant concept: The costs related to changing prices are not about production or past expenses, but about the act of adjusting prices itself.
Recognize that 'Menu costs' refer to the costs businesses face when changing prices, such as printing new menus, updating systems, or informing customers.
Conclude that the term 'Menu costs' is the correct answer because it specifically describes the costs incurred by firms when they change their prices.
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