If factor markets were perfectly competitive, then full employment would be the normal condition and
A)inflation would always be zero
B)output would rise steadily with price increases
C)there would never be any reason for prices to change
D)the AS-curve would be horizontal
E)the AS-curve would be vertical

Question

Quizplus · Accepted Answer

In a perfectly competitive factor market with full employment, the aggregate supply (AS) curve would be vertical. This indicates that the total output of the economy is at its maximum potential, and changes in the price level would not affect the quantity of goods and services supplied.

If Factor Markets Were Perfectly Competitive, Then Full Employment Would