A manufacturer of bicycles notices that the price of bicycles is going up and therefore increases the number o

Question

A manufacturer of bicycles notices that the price of bicycles is going up and therefore increases the number of bicycles produced. But the manufacturer has failed to notice that all prices are increasing, including wages and the price of other inputs used in the production of bicycles.

5.1. Which of following theories of the upward sloping short-run aggregate supply curve best describes what is happening in the manufacturing of bicycles?

A. The misperceptions theory

B. The sticky-wage theory

C. None of these choices

D. The sticky-price theory

Answer 1

A (i think)