Exhibit 10-1 Aggregate supply curve

In Exhibit 10-1, there are plenty of idle resources and no upward pressure on prices in:
A) the segment labeled ab.
B) the segment labeled bc.
C) the segment labeled cd.
D) both segment bc and segment cd.

Question

Exhibit 10-1 Aggregate supply curve

In Exhibit 10-1, there are plenty of idle resources and no upward pressure on prices in:
A) the segment labeled ab. 
B) the segment labeled bc. 
C) the segment labeled cd. 
D) both segment bc and segment cd.

Quizplus · Accepted Answer

In the segment labeled ab, there are plenty of idle resources and no upward pressure on prices because aggregate supply exceeds aggregate demand. This means that firms have excess capacity, and they don't need to increase prices to sell more output.

Exhibit 10-1 Aggregate Supply Curve