When the Aggregate Supply Curve Is Horizontal

question 138

Multiple Choice

When the aggregate supply curve is horizontal,

• A) many firms are likely to have excess capacity.
• B) the economy is close to full capacity.
• C) resources are being utilized at full capacity.
• D) the prices level increases with additional production.

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Definitions:

Expected Income

Expected income is the income a person or entity anticipates receiving over a certain period, based on current or future economic factors.

Utility Maximizer

An economic actor who seeks to get the maximum satisfaction or utility from resources available, under the constraints faced.

Probability

The measure of the likelihood that an event will occur, often expressed as a number between 0 and 1, where 1 indicates certainty.

Premium

A premium refers to the additional amount paid for a product, service, or insurance policy over and above its basic cost.