Figure 5-11

-Refer to Figure 5-11.Which supply curve is most likely relevant over a very long period of time?
A)S₁
B)S₂
C)S₃
D)All of the above are equally likely to be relevant over a very long period of time.

Question

Figure 5-11
 
-Refer to Figure 5-11.Which supply curve is most likely relevant over a very long period of time?
A)S₁ 
B)S₂ 
C)S₃ 
D)All of the above are equally likely to be relevant over a very long period of time.

Quizplus · Accepted Answer

S₃ is the most likely relevant supply curve over a very long period of time since it represents the potential output level of the economy, assuming that all inputs are utilized efficiently. As time goes by, technological advancements enable firms to produce more output with the same amount of inputs or to produce the same output with fewer inputs, leading to an increase in the economy's potential output level. Therefore, the long-run supply curve shifts to the right over time. S₁ and S₂ are short-run supply curves that are affected by temporary changes in input prices, technology, or other factors that may change over time.

Figure 5-11 -Refer to Figure 5-11.Which Supply Curve Is Most Likely Relevant