-Refer to the graphs in the exhibit.In period 2, which of the following would cause the aggregate supply curve to shift from AS to AS'?
A) an increase in resource prices, improved technology, or an extension of patent protection
B) a decrease in resource prices, improved technology, or an extension of patent protection
C) an appreciation of the dollar, higher inflation in Europe, or a decrease in resource prices
D) a depreciation of the dollar, higher inflation in Asia, or improved technology

Question

-Refer to the graphs in the exhibit.In period 2, which of the following would cause the aggregate supply curve to shift from AS to AS'?  
A) an increase in resource prices, improved technology, or an extension of patent protection 
B) a decrease in resource prices, improved technology, or an extension of patent protection 
C) an appreciation of the dollar, higher inflation in Europe, or a decrease in resource prices 
D) a depreciation of the dollar, higher inflation in Asia, or improved technology

Quizplus · Accepted Answer

In period 2, if there is a decrease in resource prices, it will reduce the firms' costs and increase their profits. With improved technology, firms can produce goods at a lower cost, which increases their profit margins. Extension of patent protection encourages innovation and investment in new technologies, which can further improve productivity and lower costs. These factors lead to a shift in the aggregate supply curve from AS to AS' indicating an increase in potential output at every price level. Therefore, option B is the correct answer.

-Refer to the Graphs in the Exhibit