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, if the price level falls, firms typically face no immediate change in input costs. However, the lower selling prices reduce their profitability, leading them to reduce output.

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