The sticky price explanation of the short-run aggregate supply curve says that when the average price level rises,
A. because of adjustment costs associated with changing prices, some firms will not raise their prices immediately which may temporarily boost their sales.
B. firms will raise their output prices by more than the increase in the average price level to make up for the shortfall in sales.
C. consumers are unwilling to pay higher prices resulting in a decrease in aggregate demand.
D. some firms will immediately pass the higher prices to consumers.
Ans: A. because of adjustment costs associated with changing prices, some firms will not raise their prices immediately which may temporarily boost their sales.
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The impact of an increase in the price of a particular good is illustrated as a
A) leftward shift in its demand curve. B) rightward shift in its demand curve. C) movement upward and to the left along its demand curve. D) movement downward and to the right along its demand curve. E) rightward shift in its demand curve and a movement upward and to the left along its demand curve.
Refer to Figure 12-5. If the market price is $20, what is the amount of the firm's profit?
A) $5,400 B) $6,750 C) $8,100 D) $16,200