In Long-Run Full-Employment Equilibrium, Which of the Following Is True

question 71

Multiple Choice

In long-run full-employment equilibrium, which of the following is true ?

• A) The CPI equals AD equals the peak of the production function curve.
• B) The horizontal LRAS curve equals the intersection of the demand and supply curves in the labor market.
• C) The CPI equals the aggregate production function at the equilibrium wage rates.
• D) The CPI equals AD equals SRAS equals LRAS.

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Definitions:

Variable Costing

A financial recording approach that incorporates only variable manufacturing expenses, such as raw materials, direct workforce, and fluctuating production overheads, into the costs of goods produced.

Net Operating Income

A financial term representing the profit made from a company’s operations, after subtracting operating expenses from operating income.

Absorption Costing

The product cost determination method under this accounting strategy includes the expenses for direct materials, direct labor, and all manufacturing overhead, whether it is variable or fixed.

Gross Margin

A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage.