Which Statement Is Consistent with an Increase in the Quantity

question 154

Multiple Choice

Which statement is consistent with an increase in the quantity of output supplied, according to the misperceptions theory?

• A) The price level increases less than expected so that firms believe the relative price of their output has increased.
• B) The price level increases less than expected so that firms believe the relative price of their output has decreased.
• C) The price level increases more than expected so that firms believe the relative price of their output has increased.
• D) The price level increases more than expected so that firms believe the relative price of their output has decreased.

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Definitions:

Equilibrium World Price

The price at which the supply of a good on a global scale exactly matches the world demand for that good.

Production Possibilities Curve

A graphical representation that shows the maximum quantity of two goods that can be produced within a given resource constraint.

Trading Possibilities Curve

A graphical representation that shows the different quantities of two goods or services that a country can efficiently produce and trade given fixed resources.

Specialize

The process of focusing on a narrow area of expertise or production, allowing individuals or firms to increase efficiency and quality.