Narrbegin 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 labelled ab.
B) the segment labelled bc.
C) the segment labelled cd.
D) both segment bc and segment cd.

Question

Narrbegin 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 labelled ab. 
B) the segment labelled bc. 
C) the segment labelled cd. 
D) both segment bc and segment cd.

Quizplus · Accepted Answer

According to the exhibit, segment bc represents the range of output where the economy's existing resources are being used more intensively, leading to higher production levels and employment as price levels increase. Segment cd represents the range of output where additional resources are being added to production to meet the increased demand, which can also lead to higher production and employment. Therefore, both segments bc and cd are likely to experience an increase in production and employment with higher price levels. However, segment ab represents a range of output where production is already at full capacity, so further increases in price levels would not lead to a significant increase in production or employment.

Narrbegin Exhibit 14.1 Aggregate Supply Curve