In the short run, the aggregate supply curve is relatively flat because at any point in time:
A) firms are assumed to supply all the output demanded with relatively small changes in prices.
B) the labor costs faced by firms are slower to adjust than final prices.
C) technology advances faster than production costs.
D) firms can not face increases in the output demanded without experiencing small reductions in profits.

Question

Quizplus · Accepted Answer

In the short run, firms are assumed to have excess capacity and can increase output without experiencing significant increases in costs or prices. Therefore, the aggregate supply curve is relatively flat.

In the Short Run, the Aggregate Supply Curve Is Relatively