What Is the Profit Effect

Multiple Choice

What is the profit effect?

A) At equilibrium prices, when costs rise, profit margins are able to float with them and be passed along.
B) When the price level rises, output prices rise relative to input prices (costs) , raising producers' short-run profit margins.
C) When the price level decreases, output prices rise relative to input prices (costs) , raising producers' short-run profit margins.
D) It is only a long-run phenomenon.