Question

Considering the imperfect information model, if the price level deceases by more than producers expected, the...

Considering the imperfect information model, if the price level deceases by more than producers expected, the producer

Group of answer choices

A)increases production.

B)hires more workers.

C)does not change production.

D)decreases production.

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Answer #1

Answer :- Option 'd' is the correct Answer,

According to the imperfect-information model, when the price level falls but the producer did not expect it to fall, the producer decreases production.

The imperfect-information model assumes that producers find it difficult to distinguish between changes in the overall level of prices and relative prices.

The imperfect-information model bases the differences in the short-run and the long-run aggregate supply curve on temporary misperception about prices.

Each of the two models of short-run aggregate supply is based on some market imperfection. In the imperfect-information model, the imperfection is that firms confuse changes in the overall level of prices with changes in relative prices.

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