Use the Following Diagram to Answer the Following Questions

question 21

Multiple Choice

Use the following diagram to answer the following questions.

-Refer to Diagram 14-2. In the above diagram, which of the following illustrates inflation caused by the activity of labor unions?

• A) an shift in aggregate demand from AD₁ to AD₂ due to the increased purchasing power of union members.
• B) a shift in aggregate demand from AD₁ to AD₂ due to the increased quality of union products.
• C) a shift in aggregate supply from AS₂ to AS₁ due to the restriction of employment opportunities by unions.
• D) a shift in aggregate supply from AS₁ to AS₂ due to union activity which forces wages up.

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Definitions:

Demand Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity demanded by consumers over a specified period.

Profit-Maximizing

The process of adjusting production and pricing strategies to achieve the highest possible profit based on current market conditions.

Monopolistic Competition

An economic configuration where lots of enterprises sell products that are near equivalents but not perfect matches, offering them a measure of market dominance.

Zero Economic Profit

A situation where a firm earns just enough revenue to cover its total costs, including both explicit and implicit costs.