According to misperceptions theory,if a firm thought that inflation was going to be 5 percent and actual inflation was 6 percent,how may the firm be affected?
A)It may believe that the relative price has increased, so it would increase production.
B)It may believe that the relative price has increased, so it would decrease production.
C)It may believe that the relative price has decreased, so it would increase production.
D)It may believe that the relative price has decreased, so it would decrease production.

Question

Quizplus · Accepted Answer

If a firm expects 5% inflation but actual inflation is 6%, it may perceive its prices as relatively higher than expected, leading it to increase production, thinking its goods are more valuable.

According to Misperceptions Theory,if a Firm Thought That Inflation Was