The profit effect occurs because,in the short run,resource costs typically do not increase as rapidly as the price of goods and services.
Some costs,like labor contracts or rents,do not immediately increase when the price level rises.

Question

Quizplus · Accepted Answer

In the short run, some costs such as labor contracts or rents do not increase immediately when the price level rises, leading to the profit effect.

The Profit Effect Occurs Because,in the Short Run,resource Costs Typically