Suppose the demand for hamburgers increases. In the short run, firms that produce hamburgers will experience a rise in prices, which will induce them to
A) decrease production and decrease the number of workers.
B) increase production and increase the number of workers.
C) decrease production and increase the number of workers.
D) increase production and decrease the number of workers.

Question

Quizplus · Accepted Answer

In the short run, firms that produce hamburgers will increase production and hire more workers to meet the increased demand for hamburgers. This is because firms have limited capacity to increase production in the short run due to fixed inputs such as equipment and facilities. Therefore, the only way to increase output is by hiring more workers and operating the equipment more intensively. As a result of increased production, firms may experience economies of scale, leading to lower costs and eventually lower prices in the long run.

Suppose the Demand for Hamburgers Increases