According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer:
A) increases production.
B) does not change production.
C) decreases production.
D) hires more workers.

Question

Quizplus · Accepted Answer

According to the imperfect-information model, when the price level falls unexpectedly, producers may mistake this for a relative decrease in the price of their specific product rather than a general decrease in the price level. As a result, they might believe their goods are less valuable relative to others and decrease production in response.

According to the Imperfect-Information Model, When the Price Level Falls