The aggregate supply curve is usually assumed to get progressively steeper at relatively higher levels of output because
A)of increasing factor prices.
B)of rising competition among price setters.
C)of diminishing marginal productivity of the factors of production.
D)of increasing productivity of the factors of production.
E)of excess capacity at higher levels of output.

Question

Quizplus · Accepted Answer

The diminishing marginal productivity of the factors of production is the most likely reason for the aggregate supply curve to get progressively steeper at relatively higher levels of output. As output increases, firms will have to start using less efficient inputs to produce additional units of output. Therefore, the costs of production will increase faster than the increase in output, leading to a steeper aggregate supply curve.

The Aggregate Supply Curve Is Usually Assumed to Get Progressively