A Rising Price Level in the Short Run May Create

question 186

Multiple Choice

A rising price level in the short run may create an incentive for firms to increase production because

• A)costs of production will increase
• B)total sales revenue will decrease
• C)profits will increase
• D)costs of production will increase faster than total revenue
• E)output prices are generally not fixed by contract whereas resource prices are

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Definitions:

Income

The monetary payment received for goods or services, or from other sources, like investments, over a certain period of time.

Expenses

Costs incurred in the process of earning revenue, including operational costs, overheads, and costs of goods sold.

Equivalent Variation

A measure in economics that represents the amount of money a consumer would need to reach their original utility after a price change.

Tax Imposed

A financial charge or levy mandated by a government on individuals or entities.