In the long run,the shape of the aggregate supply curve is
A) upward-sloping, because output can be increased only at higher costs
B) horizontal, because all inputs are variable
C) horizontal, because markets become perfectly competitive
D) vertical, because further expansion of output is unprofitable, regardless of prices
E) downward-sloping, because firms must ultimately charge lower prices in order to sell more output

Question

Quizplus · Accepted Answer

In the long run, the aggregate supply curve is vertical because the economy's total output is determined by its resources (labor, capital, land, and technology) and not by the price level. This implies that in the long run, an economy cannot produce beyond its full capacity regardless of price changes.

In the Long Run,the Shape of the Aggregate Supply Curve