If $\pi$ $\pi$ ^e:
A) Firms' Profits Will Increase

question 152

Multiple Choice

If $\pi$ < $\pi$ ^e:

• A) firms' profits will increase.
• B) money growth will cause the short-run aggregate supply curve to shift.
• C) firms will reduce their output.
• D) there will be no change in real GDP growth because it is determined by real factors.

---

Definitions:

Demand Elasticity

An indicator that reflects the degree of change in demand for a good due to price adjustments.

Optimal Strategy

The best course of action to achieve the highest payoff or benefit, given a particular set of conditions.

Perfectly Price Discriminate

A pricing strategy where a seller charges the maximum possible price each individual consumer is willing to pay for each unit, thereby extracting all consumer surplus.

Perfect Price Discrimination

A pricing strategy where a seller charges the maximum price each consumer is willing to pay, capturing the entire consumer surplus.