With the Lucas supply function, a price ________ means actual price is either greater than or lower than expected price.
A) floor
B) ceiling
C) anomaly
D) surprise

Question

Quizplus · Accepted Answer

The Lucas supply function assumes that firms have rational expectations and produce output based on their expected price. Therefore, if the actual price is different from what was expected, it results in a surprise or an unexpected outcome. Therefore, the best choice is D) surprise.

With the Lucas Supply Function, a Price ________ Means Actual