Suppose That There Is an Increase in the Costs of Production

question 116

Multiple Choice

Suppose that there is an increase in the costs of production that shifts the short-run aggregate supply curve left.If there is no policy response,then eventually

• A)because unemployment is low,wages will be bid up and short-run aggregate supply will shift right.
• B)because unemployment is low,wages will be bid down and short-run aggregate supply will shift right.
• C)because unemployment is high,wages will be bid up and short-run aggregate supply will shift right.
• D)because unemployment is high,wages will be bid down and short-run aggregate supply will shift right.

---

Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to fixed costs and profits.

Gross Sales

The total amount of sales generated by a business before any deductions like returns, discounts, and allowances.

Direct Expenses

Expenses directly linked to the creation of certain products or services, including labor and raw materials.

Direct Expense

Expenses that can be directly traced to a specific cost object, such as a product or a department, including materials and labor directly involved in production.