Question

If an increase occurs in the demand for the output of industry A, we would expect all of the following to happen except:A. an increase in the profits of industry A. B. a decrease in prices of inputs used in the production of A.C. an increase in the output of industry A. D. an increase in the demand for inputs used in the production of A.

Answer 1

Answer:

The correct answer is option B.

Explanation:

The total revenue and profits of the industry as the price level  increases with increase in the demand.

When there is an increase in the demand for the output of an industry, that industry will increase the production to match the increase in the demand. The increase in production will cause output level to increase.

In order to produce more output the industry will require more inputs, so the demand for inputs will increase.

An increase in the demand for inputs will be accompanied by increase in their prices.

There will not be any decline in the price of inputs.