Fluctuations Around the Long-Run Aggregate Supply Curve Are

question 23

Multiple Choice

Fluctuations around the long-run aggregate supply curve are:

• A) called the business cycle.
• B) experienced as expansions, recessions, and recoveries.
• C) normal for an economy.
• D) All of these are true.

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Definitions:

Economic Profits

The difference between total revenue and total economic costs (including both explicit and implicit costs), representing surplus or profit not achievable in perfect competition.

Competitive Industries

Industries characterized by many firms competing for market share, leading to innovation and efficient resource allocation.

Production Costs

Expenses incurred during the process of creating a good or service, including labor, raw materials, and overhead costs.

Decreasing-Cost Industry

An industry in which expansion through the entry of firms lowers the prices that firms in the industry must pay for resources and therefore decreases their production costs.