If a Firm Facing a Perfectly Elastic Demand Curve Raises

question 39

Multiple Choice

If a firm facing a perfectly elastic demand curve raises its price,

• A)it will still sell exactly the same amount of output as it did at the lower price
• B)it will lose some, but not all, of its sales
• C)its sales will decrease to zero
• D)its sales will increase
• E)it is impossible to predict what will happen to its sales

---

Definitions:

Money Supply

The money supply is the total amount of money—cash, coins, and balances in bank accounts—in circulation within an economy at a specific time.

Real GDP

The total value of all goods and services produced within a country in a specific period, adjusted for inflation, reflecting the actual growth in economic performance.

Shoeleather Costs

The metaphorical term for the increased costs of transactions, including time and effort, caused by inflation.

Menu Costs

The costs to a company resulting from changing its prices. This can include the actual costs of changing price lists and updating marketing materials.