Why is the AS curve upward-sloping?
A)Because firms will produce more if prices are higher,despite no increase in profits.
B)Because firms will experience higher profits at higher prices and will therefore produce more.
C)Because aggregate demand rises with higher prices.
D)Because the LAS curve is also upward sloping.

Question

Quizplus · Accepted Answer

The AS curve is upward-sloping because firms will produce more if prices are higher due to the fact that they will experience higher profits at higher prices. As prices increase, the marginal cost of production also increases, allowing firms to increase production and earn higher profits. However, there are limits to how much production can be increased, which is why the AS curve is not perfectly elastic. As production expands, the marginal cost of production increases even more, eventually causing profits to decrease.

Why Is the AS Curve Upward-Sloping