In the short run, an increase in the price level induces firms to expand production because
A. higher prices allow firms to hire more inputs by offering higher prices for inputs, which increases productivity and profits.
B. prices of inputs are held constant, so the higher prices for firms' products imply that it is profitable to expand production.
C. 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.
D. they can increase profits by increasing maintenance costs.
Answer: B
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