Which of the following explains why we assume that the economy's aggregate supply (AS)curve has a positive slope?
A)Inputs become more expensive at higher levels of output.
B)Inputs become less expensive at higher levels of output.
C)Firms' unit costs rise as output increases.
D)Firms' unit costs fall as output increases.
E)Aggregate demand increases at higher levels of national income.

Question

Quizplus · Accepted Answer

The economy's aggregate supply (AS) curve has a positive slope because firms' unit costs rise as output increases. This is because of diminishing marginal product of labor and increasing opportunity costs of production factors, such as land and capital. As firms produce more output, they must hire more workers, but each additional worker adds less and less to the overall production due to limited resources. Additionally, firms may have to use less efficient production methods or employ less skilled workers as they expand output, which further raises costs.

Which of the Following Explains Why We Assume That the Economy's