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:

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A method used by animals and plants to blend with their surroundings to hide from predators or prey.

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A form of natural selection that favors the average individuals in a population, thereby maintaining the population's genetic variance over time.

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