In the short run,an increase in the price level induces firms to expand production because
A)prices of inputs are held constant so the higher prices for their product implies that it is profitable to expand production.
B)each firm must keep its production level up to the level of its rivals,and some firms will expand production as the price level increases.
C)the higher prices allow the firm to hire more inputs by offering higher prices to the inputs,which increases productivity and profits.
D)they can increase profits by increasing maintenance costs.

Question

Quizplus · Accepted Answer

In the short run, the prices of inputs are typically fixed, so when the price level increases, firms can charge higher prices for their products. This means that the profit margin per unit sold increases, making it profitable for firms to expand production to meet the increased demand.

In the Short Run,an Increase in the Price Level Induces