Which of the Following Is Correct If There Is an Adverse

question 4

Multiple Choice

Which of the following is correct if there is an adverse supply shock?

• A)The short-run aggregate supply curve and the short-run Phillips curve both shift right.
• B)The short-run aggregate supply curve and the short-run Phillips curve both shift left.
• C)The short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
• D)The short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right.

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Definitions:

Profit Maximization

The process or strategy of adjusting production and operation inputs to achieve the highest possible profit.

Short-Run Marginal Costs

The cost to produce one additional unit of a good or service in the short run, where at least one input is fixed.

Market Price

The present cost at which a good or service can be purchased or sold in the market.

Profit-Maximizing Firm

A company that chooses its level of output and pricing strategy to achieve the highest possible profit based on its costs and the market demand.