In the short-run with fixed wages,the SAS curve is positively sloped because
A)the marginal product of labor declines,marginal costs rise.
B)the marginal product of labor increases,marginal costs rise.
C)marginal cost equals price and marginal costs decline.
D)None of the above.

Question

Quizplus · Accepted Answer

In the short-run with fixed wages, the SAS (short-run aggregate supply) curve is positively sloped because as the output level increases, the marginal product of labor declines (due to the fixed supply of labor), resulting in a rise in marginal costs. This means that firms need to receive higher prices to cover the increased costs of production, leading to a positive slope in the SAS curve. Option B is incorrect because increasing marginal product of labor would lead to a decrease in marginal costs, not an increase. Option C is incorrect because it assumes that marginal costs decline, which is not necessarily the case.

In the Short-Run with Fixed Wages,the SAS Curve Is Positively