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 increase in price as the price level rises in the short run.
D)All of the above are correct.

Question

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 increase in price as the price level rises in the short run.
D)​All of the above are correct.

Quizplus · Accepted Answer

The short-run aggregate supply curve slopes upward because firms can purchase some inputs at prices that are temporarily fixed in the short run. In the short run, some prices, such as wages and supplier contracts, may be fixed and unable to adjust immediately to changes in the overall price level. This allows firms to increase output and profits in response to higher prices. However, in the long run, all prices are flexible and the short-run aggregate supply curve becomes vertical.

The Short-Run Aggregate Supply Curve Slopes Upward Because