Which of the following explains why the aggregate supply curve is generally upward sloping?
A) When real output decreases, per-unit production costs tend to increase.
B) When aggregate demand shifts rightward, aggregate supply also always shifts rightward as well.
C) When real output increases, per-unit production costs decrease.
D) When real output increases, per-unit production costs increase as well.

Question

Quizplus · Accepted Answer

The aggregate supply curve is generally upward sloping because, as the real output increases, the per-unit production costs tend to increase as well. This is due to factors such as the need to pay overtime to workers or higher prices for raw materials when production is ramped up, which in turn makes supplying additional output more costly.

Which of the Following Explains Why the Aggregate Supply Curve