According to the misperceptions theory of the short-run aggregate supply curve, if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent, then the firm would believe that the relative price of what it produces had
a. increased, so it would increase production.
b. increased, so it would decrease production.
c. decreased, so it would increase production.
d. decreased, so it would decrease production.
d
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Minneapolis business Rogue Chocolatier sells specialty chocolate bars with a high cocoa content. The price of cocoa beans shot up 44 percent in 2008. How did this affect Rogue's short run costs?
A) Short run variable costs would increase. B) Short run fixed costs would decrease. C) Short run total costs would decrease. D) Short run average fixed costs would increase.
The "new product bias" in the consumer price index refers to the idea that
A) consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. B) consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. C) new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers. D) consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers.
Market-day supply elasticities can vary between 0 and 1
Indicate whether the statement is true or false
For a firm in a perfectly competitive market, if it is producing at a level of output where marginal costs are less than marginal revenue it:
A. is producing a profit-maximizing quantity. B. should invest more in advertising in order to raise revenues. C. should cut back production to increase profits. D. should increase production to increase profits.