In the Short Run, Firms Expand Their Production When the Price

question 19

Multiple Choice

In the short run, firms expand their production when the price level rises because

• A)the money wage rate remains constant so the higher prices for their product makes it profitable for firms to expand production.
• B)each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases.
• C)firms can increase their profits by increasing their maintenance.
• D)the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits.

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Definitions:

Simplify

The process of reducing an expression to its simplest form.

Average Cost

The total cost of production divided by the number of goods produced.

Setup Cost

The initial expense required to create a new product or establish a new process, including costs for equipment, facilities, and labor.

Multiply

The mathematical operation of increasing a number by another specified number of times, essentially repeated addition.