Equilibrium in the long run occurs when:
A) AD intersects the short-run AS, regardless of output level
B) AD intersects the short-run AS, regardless of price level
C) AD intersects the short-run and the long-run AS curves at the same point
D) The short-run AS curve intersects the long-run AS curve

Question

Quizplus · Accepted Answer

Equilibrium in the long run occurs when AD intersects the short-run and long-run AS curves at the same point. This is because in the long run, prices and wages have adjusted to changes in demand, and the economy has reached its potential output level determined by the factors of production. Therefore, in the long run, the economy will produce at its full employment level, and the intersection of AD, short-run AS, and long-run AS occurs at this level, with prices and output both at their equilibrium levels.

Equilibrium in the Long Run Occurs When