In the Short Run, an Unexpected Increase in Prices Will

question 91

Multiple Choice

In the short run, an unexpected increase in prices will

• A) reduce resource prices and increase the quantity of goods supplied.
• B) decrease the productive capacity of firms and decrease the quantity of goods supplied.
• C) increase the profits of firms, thereby leading them to expand output.
• D) increase the profits of firms, thereby leading them to reduce output.

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Definitions:

Upward Counterfactuals

Hypothetical scenarios that individuals imagine which are better than what actually happened, often used in reflecting on past events.

Downward Counterfactual

Thinking about how a situation could have been worse, often leading to feelings of relief or contentment.

Upward Counterfactual

An imagined alternative in which the outcome is better than what actually happened.

Misinformation Effect

The phenomenon where people's memories of an event can be influenced by incorrect information presented after the event, leading to false recollections.