Why might a rising price level in the short run create an incentive for firms to increase production?
A) because costs of production will increase
B) because total sales revenue will decrease
C) because profits will increase
D) because costs of production will increase faster than total revenue

Question

Why might a rising price level in the short run create an incentive for firms to increase production?  
A) because costs of production will increase 
B) because total sales revenue will decrease 
C) because profits will increase 
D) because costs of production will increase faster than total revenue

Quizplus · Accepted Answer

A rising price level in the short run can increase profits for firms if they are able to increase production and sell their output at the higher prices. This can create an incentive for firms to increase production and take advantage of the higher prices, leading to an increase in supply.

Why Might a Rising Price Level in the Short Run