The short-run aggregate supply curve slopes:
A)downward because firms can sell more, and hence, will produce more when prices are lower.
B)downward because firms find it costs less to purchase labor and other inputs when prices are lower and hence, they produce more.
C)upward because firms normally can purchase some labor and other inputs at fixed costs for some period of time.
D)upward because firms find that it costs more to purchase labor and other inputs when prices are higher and hence they must produce and sell more in order to make a profit.

Question

The short-run aggregate supply curve slopes:
A)​downward because firms can sell more, and hence, will produce more when prices are lower.
B)​downward because firms find it costs less to purchase labor and other inputs when prices are lower and hence, they produce more.
C)​upward because firms normally can purchase some labor and other inputs at fixed costs for some period of time.
D)​upward because firms find that it costs more to purchase labor and other inputs when prices are higher and hence they must produce and sell more in order to make a profit.

Quizplus · Accepted Answer

The short-run aggregate supply curve slopes upward because in the short run, some production costs, such as wages, are fixed or slow to adjust. This means that when prices for goods and services increase, firms can produce more while their input costs remain relatively stable, leading to higher profits and an incentive to increase output.

The Short-Run Aggregate Supply Curve Slopes