In the short run, firms expand their production when the price level rises because
A)the money wage rate remains constant so the higher prices for their product makes it profitable for firms to expand production.
B)each firm must keep its production up to the level of its rivals, and some firms will expand production as the price level increases.
C)firms can increase their profits by increasing their maintenance.
D)the higher prices allow the firm to hire more workers by offering higher wages, thereby increasing productivity and profits.

Question

Quizplus · Accepted Answer

In the short run, the money wage rate is typically sticky or constant, so when the price level rises, firms can sell their products at higher prices while their costs remain the same, making it profitable to expand production.

In the Short Run, Firms Expand Their Production When the Price