Which of the following explains the shape of the short-run aggregate supply curve?
A)The inverse relationship between the quantity supplied and the cost per unit
B)The direct relationship between the quantity supplied and the cost per unit
C)The direct relationship between the quantity supplied and the price level
D)The inverse relationship between quantity supplied and GDP
E)The inverse relationship between quantity supplied and the profit per unit

Question

Which of the following explains the shape of the short-run aggregate supply curve?​
A)The inverse relationship between the quantity supplied and the cost per unit
B)The direct relationship between the quantity supplied and the cost per unit​
C)The direct relationship between the quantity supplied and the price level​
D)The inverse relationship between quantity supplied and GDP​
E)The inverse relationship between quantity supplied and the profit per unit​

Quizplus · Accepted Answer

The short-run aggregate supply curve shows a direct relationship between the quantity supplied by firms and the price level. This is because firms are generally able to increase their output in response to a higher price level, since it means they can earn higher profits. However, this relationship only holds in the short run, since in the long run, firms can adjust their production capacity and factor usage to better respond to changes in the price level.

Which of the Following Explains the Shape of the Short-Run