Suppose the price level is rising faster than expected.Which of the following is among the reasons a firm would find it profitable to expand output in the short run?
A) All the firm's costs are contractually fixed.
B) Prices for the firm's output are rising with the price level.
C) The firm is interested in minimizing cost per unit, but NOT total profits.
D) All of the firm's costs are variable.

Question

Suppose the price level is rising faster than expected.Which of the following is among the reasons a firm would find it profitable to expand output in the short run?  
A) All the firm's costs are contractually fixed. 
B) Prices for the firm's output are rising with the price level. 
C) The firm is interested in minimizing cost per unit, but NOT total profits. 
D) All of the firm's costs are variable.

Quizplus · Accepted Answer

If the price level is rising faster than expected, it means that the prices of the firm's output are also rising. Therefore, the firm can increase its revenue by expanding output in the short run. The other choices are not relevant to the situation described.

Suppose the Price Level Is Rising Faster Than Expected