Suppose there is a drop in the price of an important factor input. What will be the effect on the aggregate supply curve?
A)The AS curve will shift to the right.
B)There will be movement to the left, along the AS curve.
C)There will be movement to the right, along the AS curve.
D)The AS curve will shift to the left.
E)There will be no change in the AS curve.

Question

Quizplus · Accepted Answer

A drop in the price of an important factor input will decrease the cost of production for firms, which will lead to an increase in their willingness to produce at any given price level. Therefore, the aggregate supply curve will shift to the right.

Suppose There Is a Drop in the Price of an Important