Figure 10-18 -Beginning from Long-Run Equilibrium at Point E₁ in Figure 10-18,the

question 157

Multiple Choice

Figure 10-18

-Beginning from long-run equilibrium at point E₁ in Figure 10-18,the aggregate demand curve shifts to AD₂.The real GDP and price level (CPI) in short-run equilibrium will be

• A)$10 billion and 200.
• B)$10 billion and 150.
• C)$10 billion and 100.
• D)$4 billion and 150.

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Definitions:

Long-run Equilibrium

A state in which all factors of production and outputs are variable, allowing for the adjustment of all inputs, leading to a balanced economic condition over time.

Zero Economic Profits

Occurs when a firm earns just enough revenue to cover its total costs, including opportunity costs, but no more.

Efficiently

Performing or functioning in the best possible manner with the least waste of time and effort.

Economies of Scale

The cost advantage achieved by businesses when production becomes efficient, as the scale of operation increases leading to a reduction in average costs.