✅ (Solved): Which statement is consistent with an increase in the quantity of output supplied, according to the misperceptions theory? a. The price level increases less than expected so that firms believe the relative price of their output has decreased’ .b. The price level increases more than expected so that firms believe the relative price of their output has decreased .c. The price level increases less than expected so that firms believe the relative price of their output has increased. d. The price level increases more than expected so that firms believe the relative price of their output has increased

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Which statement is consistent with an increase in the quantity of output supplied, according to the misperceptions theory?
a. The price level increases less than expected so that firms believe the relative price of their output has decreased’
.b. The price level increases more than expected so that firms believe the relative price of their output has decreased
.c. The price level increases less than expected so that firms believe the relative price of their output has increased.
d. The price level increases more than expected so that firms believe the relative price of their output has increased

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The price level increases more than expected so that firms believe the relative price of their output has increased
Explanation:
This theory is based on the inability of producers to differentiate changes in relative prices and general prices. When price level increases, the producers may tend to think that the relative prices of their output has increased, which makes them increase production. This is the same case when there is a decrease in price level, as producers think that their relative output prices has decreased which decreases production.

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Answered on June 25, 2020 5:06 pm

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