Consider the Basic AD/AS Model

question 52

Multiple Choice

Consider the basic AD/AS model. If major labour unions succeed in increasing wages across the economy, the AS curve will shift

• A)upward (to the left), increasing the price level.
• B)downward (to the right)and then return immediately to its original position.
• C)downward (to the right), reducing the price level.
• D)upward (to the left)and then return immediately to its original position.
• E)none of the above -- there will no effect on the AS curve.

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Definitions:

Long Run

A period in which all factors of production and costs are variable, allowing for adjustments in production to meet changes in the market or economy.

Price-taker Market

A market condition where individual buyers or sellers have no power to influence the price of the good or service, typically in a perfectly competitive market.

Average Total Cost

The total cost of production divided by the quantity produced, encompassing both fixed and variable costs.

Elasticity of Supply

A measure of how much the quantity supplied of a good responds to a change in the price of that good.