The short-run aggregate supply curve illustrates the idea that if the price level falls, firms will experience
A)falling input costs, so they will increase their output level.
B)no change in input costs, so they will not change their output level.
C)falling inputs costs, so they will reduce their output level.
D)no change in input costs, so they will reduce their output level.

Question

Quizplus · Accepted Answer

In the short run, input costs are typically sticky and do not change immediately with the price level. Therefore, if the price level falls, firms will not see a change in input costs and may reduce their output level due to lower profitability.

The Short-Run Aggregate Supply Curve Illustrates the Idea That If