What Is the Profit Effect

question 86

Multiple Choice

What is the profit effect?

• A)At equilibrium prices, when costs rise, profit margins are able to float with them and be passed along.
• B)When the price level rises, output prices rise relative to input prices (costs), raising producers' short-run profit margins.
• C)When the price level decreases, output prices rise relative to input prices (costs), raising producers' short-run profit margins.
• D)It is only a long-run phenomenon.

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