Which of the following is true if marginal costs increase at a slow rate as output increases?
A)The short-run aggregate supply curve is relatively steep.
B)The short-run aggregate supply curve becomes vertical.
C)The short-run aggregate supply curve is relatively flat.
D)The long-run aggregate supply curve becomes horizontal.
E)The long-run aggregate supply curve becomes downward sloping.

Question

Quizplus · Accepted Answer

If marginal costs increase at a slow rate as output increases, it means that there are still economies of scale present, and therefore the short-run aggregate supply curve is relatively flat. In the long run, the aggregate supply curve can still become horizontal due to further investment and technological improvements.

Which of the Following Is True If Marginal Costs Increase