Which of the following statements are TRUE? I. A high price for a good encourages consumers to economize on its use, seeking out alternatives. II. Rising prices give firms the incentive to bring more goods to the market. III. Firms that experience rising input prices will seek out substitute inputs and develop production technologies to conserve on the costly input.
A) I only
B) I and II only
C) II only
D) I, II, and III

Question

Quizplus · Accepted Answer

All three statements are true. High prices encourage consumers to conserve on the use of the good and find alternatives, while rising prices incentivize firms to produce more goods. In the face of rising input prices, firms will seek out substitutes and develop technologies to conserve on the costly input.

Which of the Following Statements Are TRUE? I