If the actual price level is lower than the expected price level reflected in long-term contracts,
A) many firms will find production more profitable than they had expected and will increase the quantity of output supplied
B) many firms will find production less profitable than they had expected and will decrease the quantity of output supplied
C) many firms will find production more profitable than they had expected and will decrease the quantity of output supplied
D) many firms will find production less profitable than they had expected and will increase the quantity of output supplied

Question

Quizplus · Accepted Answer

When the actual price level is lower than expected, firms receive lower revenues than anticipated, making production less profitable, leading them to decrease output.

If the Actual Price Level Is Lower Than the Expected