In the Long Run, If the Price Level Decreases, Then

question 99

Multiple Choice

In the long run, if the price level decreases, then the economy's output level will:

• A) Increase initially, but then fall back again
• B) Increase
• C) Decrease
• D) Stay the same

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Definitions:

Selling Price

The amount at which a product or service is sold to customers.

Variable Cost

Financial outlays that fluctuate based on the activity levels or production volumes within a company.

Fixed Cost

Expenses that do not change with the level of production or sales in the short term, such as rent, salary, and insurance.

High-Low Method

A technique in cost accounting used to estimate fixed and variable cost components of a product or service based on the highest and lowest levels of activity.