Question

According to the price confusion problem, if the price of a product increases, then:a.prices as a whole fall, and the firm’s output should increase.b.the price increase is due to inflation, and the firm’s output should increase.c.the market demand has increased, and the firm’s output should decrease.d.the market demand has increased, and the firm’s output should increase.e.the price increase is due to inflation, and the firm’s output should decrease.

Answer 1

Answer:

d.the market demand has increased, and the firm’s output should increase.

Explanation:

The price confusion problem stablish that the producers are not able to figure out if the increase on the price is due to demand increase or to inflation. But the "normal" logic is that if there is an increase is because the demand has grown and the production should increase as well.