If the profit effect and misperception effect existed in both the short run and the long run, then SRAS is ____ and LRAS is ____.
A)upward sloping; upward sloping
B)upward sloping: vertical
C)vertical; upward sloping
D)vertical; vertical

Question

If the profit effect and misperception effect existed in both the short run and the long run, then SRAS is ____ and LRAS is ____.
A)​upward sloping; upward sloping
B)​upward sloping: vertical
C)​vertical; upward sloping
D)​vertical; vertical

Quizplus · Accepted Answer

The profit effect and misperception effect suggest that firms may respond to price level changes by adjusting output, leading to an upward sloping SRAS. If these effects persisted in the long run, LRAS would also be upward sloping.

If the Profit Effect and Misperception Effect Existed in Both