When the Price of All Inputs Increase by the Same

question 25

True/False

When the price of all inputs increase by the same percentage, the firm's total cost curve will rotate upward by a higher percentage if the firm's production technology exhibits increasing returns to scale.

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Definitions:

Long-Run Aggregate Supply Curve

This curve shows the relationship between the overall price level and the total output produced in an economy when wages and resource prices fully adjust to changes, reflecting an economy’s maximum sustainable output level.

Potential Output

A measure of the highest level of economic output an economy can sustain over a period without increasing inflation; synonymous with potential GDP.

Negotiable

Referring to something that can be discussed or altered through negotiation, such as terms of a contract or a financial instrument.

Expansionary Gap

A situation where the total demand in an economy exceeds its potential output, leading to inflationary pressures.