As the price level rises relative to costs and the real wage rate falls, profits _{--------------------}and the number of firms in business _{--------------------}. A)decrease; decreases B)decrease; increases C)do not change; do not change D)increase; increases E)increase; decreases

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Quizplus · Accepted Answer

As the price level rises relative to costs, firms can sell their products at higher prices, leading to increased profits. With higher profits, more firms are incentivized to enter the market, increasing the number of firms in business.

As the Price Level Rises Relative to Costs and the Real