Exhibit 14-1 Aggregate supply curve

-In Exhibit 14-1,higher price levels allow producers to earn higher profits,stimulating production and employment 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,higher price levels allow producers to earn higher profits,stimulating production and employment 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 the segment labeled bc, producers experience an increase in profits due to the higher price levels. This encourages them to increase their production and employment to meet the higher demand. However, in segment cd, as price levels continue to rise, the production costs also increase, limiting the ability of producers to expand their output. Therefore, the best choice is B) the segment labeled bc, as it represents the range of prices that lead to increased production and employment.

Exhibit 14-1 Aggregate Supply Curve