Ask Question
2 March, 10:15

In the short-run an increase in the costs of production makes a. output rise and prices fall. b. output and prices fall. c. output fall and prices rise. d. output and prices rise.

+3
Answers (1)
  1. 2 March, 11:44
    0
    C) Output fall and prices rise

    Explanation:

    In an aggregate supply, aggregate demand model, price level is the Y axis, and output is the X axis. Supply is positively related with price: the higher the price, the more firms produce.

    However, to produce someting, firms need to employ the factors of production: land, labor and capital. The wages firms pay to workers, and the rent firms pay for land and capital are the production costs. If these costs rise, then, the products will become more expensive.

    This increase in price will be met with lower demand; less customers will be willing to purchase the product, and therefore, the firms will start producing less until reaching a new equilibrium.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “In the short-run an increase in the costs of production makes a. output rise and prices fall. b. output and prices fall. c. output fall and ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers