Which of the following is an assumption of the information-based model of supply developed by Lucas?
A) Prices and wages are assumed to be flexible.
B) People are not fully informed about what is going on in the economy.
C) A positive correlation between supply price and quantity is assumed for firms' individual supply curves.
D) All of the above are accurate.
E) None of the above is accurate.

Question

Quizplus · Accepted Answer

The information-based model of supply developed by Lucas assumes that prices and wages are flexible (A), people are not fully informed about what is going on in the economy (B), and there is a positive correlation between supply price and quantity for firms' individual supply curves (C). These assumptions are fundamental to understanding how information or the lack thereof affects economic decisions and market outcomes in the model.

Which of the Following Is an Assumption of the Information-Based