If there was no misperception effect, but there was a profit effect in the short run, then SRAS is ____ and LRAS is ____.
A)upward sloping: vertical
B)upward sloping; upward sloping
C)vertical; vertical
D)vertical; upward sloping

Question

If there was no misperception effect, but there was a profit effect in the short run, then SRAS is ____ and LRAS is ____.
A)​upward sloping: vertical
B)​upward sloping; upward sloping
C)​vertical; vertical
D)​vertical; upward sloping

Quizplus · Accepted Answer

The Short-Run Aggregate Supply (SRAS) curve is upward sloping because, in the short run, firms increase their output in response to higher prices to maximize profits, which is the profit effect. The Long-Run Aggregate Supply (LRAS) curve is vertical, indicating that in the long run, the total output is determined by factors of production (like technology and resources) and is not affected by the price level.

If There Was No Misperception Effect, but There Was a Profit