The short-run aggregate supply curve of an industry would be vertical if:
A)input prices were fixed in the short run.
B)the demand for final goods was fixed in the short run.
C)there was no profit effect or misperception effect.
D)an increase in output price decreased the output of the industry.
E)output price was fixed in the short run.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve would be vertical if there was no profit effect or misperception effect, meaning that firms do not change the quantity of output they supply in response to a change in the price level. This is because the profit effect and misperception effect are reasons why the short-run aggregate supply curve is typically upward sloping; without them, the curve would not slope upwards.

The Short-Run Aggregate Supply Curve of an Industry Would Be