The short-run aggregate supply curve slopes upward because:
A)firms normally can purchase some inputs at prices that are temporarily fixed in the short run.
B)firms seek maximum profits and always try to increase output in the short run.
C)firms purchase inputs that rise in price as the price level rises in the short run.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

In the short run, firms may have certain inputs that are fixed in price or cost, such as long-term contracts for labor or raw materials. As a result, when the overall price level rises, firms can produce more output at a lower cost per unit, leading to an upward-sloping short-run aggregate supply curve. While firms may also try to increase output to maximize profits, this alone would not explain the shape of the short-run aggregate supply curve. Similarly, while some inputs may rise in price along with the overall price level, this is not always the case and does not necessarily explain the shape of the curve. Therefore, choice A is the most accurate answer.

The Short-Run Aggregate Supply Curve Slopes Upward Because