Question

If the price level of what firms produce is rising across an economy, but the costs of production are constant, then:___________.
A. the maximum potential GDP will be exceeded.
B. increase in quantity produced won't be large.
C. a majority of industries will start running into limits.
D. higher profits will induce expanded production.

Answer 1

Answer:

D. higher profits will induce expanded production.

Explanation:

If the price of a good increases and the cost remains the same ,profits earned would increase.

For example if price of a pen was initially $5 and rose to $7. The cost of making a pen is $3. Total profit would rise from $2 to $4.

According to the law of supply, the higher the price, the higher the quantity supplied and the lower the price, the lower the. quantity supplied. Therefore, the higher price would attract more producers and production would increase. Existing producers would also increase output.

I hope my answer helps you.