Exhibit 14-1 Aggregate supply curve

-In Exhibit 14-1,resources are fully employed,and competition among producers for resources will lead to a higher price level in:
A) the segment labeled ab.
B) the segment labeled bc.
C) the segment labeled cd.
D) both segment bc and segment cd.
E) the entire curve.

Question

Exhibit 14-1 Aggregate supply curve
 
-In Exhibit 14-1,resources are fully employed,and competition among producers for resources will lead to a higher price level in:
A) the segment labeled ab. 
B) the segment labeled bc. 
C) the segment labeled cd. 
D) both segment bc and segment cd. 
E) the entire curve.

Quizplus · Accepted Answer

In segment cd, resources are fully employed and any increase in demand will lead to an increase in price level due to competition among producers. In segments ab and bc, resources are not fully employed, so an increase in demand can be met by an increase in production without leading to an increase in price level. The entire curve represents the relationship between price level and output when resources are fully employed.

Exhibit 14-1 Aggregate Supply Curve