Your firm expands its output in a time when demand appears to be increasing.Demand for all goods is increasing because of inflation,and consumers want to buy all goods faster because their real purchasing power is falling due to inflation.This situation could indicate that:
A) your firm experienced future price uncertainty.
B) your firm experienced menu costs.
C) your firm experienced money illusion.
D) your firm experienced deflation.
E) your firm experienced a price confusion problem.

Question

Quizplus · Accepted Answer

The situation describes a price confusion problem, where firms cannot distinguish whether the increase in demand is due to genuine consumer interest or inflation, leading to potential misinterpretation of market signals.

Your Firm Expands Its Output in a Time When Demand