Suppose that an economy produces 2400 units of output, employing the 60 units of input, and the price of the input is $30 per unit. Refer to the information above. If productivity increased such that 3000 units are now produced with the quantity of inputs still equal to 60, then per-unit production costs would:
A) Decrease and aggregate supply would decrease
B) Decrease and aggregate supply would increase
C) Increase and aggregate supply would decrease
D) Remain unchanged and aggregate supply would remain unchanged

Question

Quizplus · Accepted Answer

The per-unit production costs would decrease because the output has increased without any increase in input, indicating a higher productivity level. As a result, the cost per unit is lower, even though the total cost remained the same. Therefore, aggregate supply would increase due to the same level of input producing more output.

Suppose That an Economy Produces 2400 Units of Output, Employing