Which of the following is true in the short run?
A)The aggregate supply curve is horizontal.
B)The aggregate supply curve is vertical.
C)Per-unit costs do not increase as much as output prices when the price level rises.
D)An increase in price per unit results in a decrease in profit per unit.
E)Firms' total costs of production decrease as output expands beyond the potential level.

Question

Quizplus · Accepted Answer

In the short run, firms' per-unit costs are fixed to some extent and do not increase as much as output prices when the price level rises. This means that firms can increase their output and generate more revenue without experiencing a significant increase in their per-unit costs, which results in higher profits. This leads to a positively sloped aggregate supply curve in the short run.

Which of the Following Is True in the Short Run