The Long-Run Aggregate Supply Curve Is the Relationship Between the Quantity

question 179

Multiple Choice

The long-run aggregate supply curve is the relationship between the quantity of real GDP supplied and ___________when ___________ .

• A) the price level; real GDP equals potential GDP
• B) the price level; real GDP equals nominal GDP
• C) real GDP demanded; the price level does not change
• D) real GDP demanded; the wage rate is constant

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Definitions:

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, leading to a reduction in average costs with increased output.

Total Fixed Cost

Total Fixed Cost is the sum of all costs that remain constant regardless of the level of production or business activity.

Economies of Scale

Businesses gain cost benefits from increasing their scale of operations, leading to a decline in the cost per unit of output as the production size enlarges.