If the Price Level in an Economy Turns Out to Be

question 119

Multiple Choice

If the price level in an economy turns out to be higher than that expected by workers and firms,_____.

• A)businesses increase production.
• B)the economy's potential output level increases.
• C)the economy's short-run aggregate supply curve shifts rightward.
• D)the economy's short-run aggregate supply curve shifts leftward.
• E)a recessionary gap develops.

Recognize the role of productivity in determining wages and employment levels.

Distinguish between different economic terms related to labor demand such as derived demand, marginal product, and MRP.

Comprehend the impact of labor supply and demand on wage determination.

Understand the principle of diminishing returns and its effect on labor productivity and MRP.

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Definitions:

Market Price

The prevailing market rate at which a service or asset can be purchased or sold, influenced by the balance of supply and demand.

Marginal Cost

The additional cost incurred from producing one more unit.

Average Revenue

The revenue received per unit of goods or services sold.

Minimize Losses

A strategy or approach aimed at reducing the amount of losses incurred in a business or investment.