If Firms Have Rational Expectations and If They Set Prices

Multiple Choice

If firms have rational expectations and if they set prices and wages on this basis, then:

A) there are likely to be unexploited profit opportunities for extended periods.
B) they will perceive their prices have risen relative to other prices, and this leads them to produce more output.
C) they will still not know the demand curve for their output and the supply curve of labor that they face.
D) on average, prices and wages will be set at levels that ensure equilibrium in the goods and labor markets.