In constructing the short-run aggregate supply curve, we assume that the goal of business is to _____
A) maximize sales revenue.
B) maximize profit.
C) maximize the growth in assets.
D) maximize the growth in sales.
E) minimize cost.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve represents the level of production that firms are willing and able to supply at different price levels in the short run. In the short run, the goal of business is generally to maximize profit, which means producing the level of output where marginal revenue equals marginal cost. Therefore, the short-run aggregate supply curve is upward sloping because as the price level rises, firms are willing to produce more output to increase their profits.

In Constructing the Short-Run Aggregate Supply Curve, We Assume That