The Aggregate Supply Curve Becomes Vertical

question 64

Multiple Choice

The aggregate supply curve becomes vertical

• A) when there is significant excess capacity.
• B) as the prices of raw materials and labor fall.
• C) at full employment.
• D) because demand falls as prices rise.
• E) for reasons that are a mystery to most economists.

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Definitions:

Horizontal Merger

A business consolidation that occurs between firms which operate in the same industry, often aimed at reducing competition or achieving economies of scale.

Interlocking Directorate

A situation where one or more members of the board of directors of a corporation are also on the board of directors of a competing corporation; illegal under the Clayton Act.

Tying Contract

An agreement requiring a customer to buy additional products or services along with a primary product or service.

Herfindahl Index

A measure of the size of firms in relation to the industry and an indicator of the amount of competition among them, calculated as the sum of the squares of the market shares of each firm within the industry.