The Aggregate Supply Curve Tends to Be Relatively Steep When

question 116

Multiple Choice

The aggregate supply curve tends to be relatively steep when GDP is above potential output because firms are operating above ________,and ________ are rising rapidly.

• A)equilibrium output; unit costs
• B)profit-maximizing output; total costs
• C)capacity; unit costs
• D)equilibrium output; total costs
• E)equilibrium output; average costs

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Definitions:

Excess Capacity

The situation where a firm or an economy is producing less than its potential output, often indicating inefficiencies or a lack of demand.

Monopolistic Competition

A market structure characterized by many firms offering products that are similar but not perfect substitutes, allowing for some degree of market power.

Pure Competition

A market structure characterized by a large number of sellers and buyers, homogeneous products, and the ease of entering and exiting the market.

Product Differentiation

The process of distinguishing a product or service from others, to make it more attractive to a particular target market.