Suppose the Cost of Insecticide (A Variable Input)decreases for Broccoli

question 136

Multiple Choice

Suppose the cost of insecticide (a variable input) decreases for broccoli farmers.In order to maximize profits,ceteris paribus,broccoli farmers should

• A)Decrease output.
• B)Keep output the same since the market price did not change.
• C)Increase output.
• D)Increase prices.

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Definitions:

Classical Dichotomy

The theoretical separation of nominal variables (such as money supply and prices) from real variables (like output and employment) in the economy, suggesting that nominal variables do not affect real output in the long run.

Nominal Variables

Variables measured in monetary units that have not been adjusted for inflation, reflecting current prices.

Money Demand

The desire to hold cash or liquid assets based on transactional, precautionary, and speculative needs.

Price Level

The comprehensive mean price across all goods and services in the current economy.