In the Short Run, an Increase in the Price Level

question 149

Multiple Choice

In the short run, an increase in the price level induces firms to expand production because

• A) prices of inputs are held constant, so the higher prices for firms' products imply that it is profitable to expand production.
• B) each firm must keep its production level up to the level of its rivals, and some firms will expand production as the price level increases.
• C) higher prices allow firms to hire more inputs by offering higher prices for inputs, which increases productivity and profits.
• D) they can increase profits by increasing maintenance costs.

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Definitions:

Free Blacks

African Americans who were not enslaved, living primarily in the North before the Civil War and in various parts of the country after abolition.

Thomas Jefferson

An American Founding Father, the principal author of the Declaration of Independence (1776), and the third President of the United States (1801–1809) known for his promotion of the ideals of republicanism in the United States.

Annuity System

System of yearly payments to Native American tribes by which the federal government justified and institutionalized its interference in Indian tribal affairs.