What happens to aggregate supply when production costs adjust completely to price increases?
A)Both equilibrium output and prices increase
B)Only prices rise;equilibrium output remains fixed
C)Only equilibrium output rises;equilibrium prices remain fixed
D)Equilibrium output falls while prices rise
E)Both equilibrium output and prices remain fixed

Question

Quizplus · Accepted Answer

When production costs adjust completely to price increases, firms face higher costs and are less willing to supply the same quantity at previous prices, leading to higher prices while equilibrium output remains fixed.

What Happens to Aggregate Supply When Production Costs Adjust Completely