Explain the reasoning behind the shape of the short-run aggregate supply curve in the short run.
What will be an ideal response?
The curve is relatively flat at low levels of price and output because at that level, resources for production, such as machinery and people, are abundantly available and few shortages occur. Thus the per-unit cost of production does not rise that much as output increases. Past full-employment, resources become scarce and there are diminishing returns to additional capital and labor. As scarcity and bottlenecks occur at higher levels of production, the per-unit cost of production increases, causing the slope of the aggregate supply curve to steepen.
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A) increases; increases; increases B) increases; decreases; increases C) increases; does not change; increases D) decreases; increases; increases E) increases; does not change; decreases
You and your friends watch a movie in your bedroom. For you and your friends, the enjoyment that you get from watching the movie is not rival in consumption
a. True b. False Indicate whether the statement is true or false