Use the Following to Answer Questions

question 113

Multiple Choice

Use the following to answer questions :
Exhibit: Shift in Aggregate Demand
-(Exhibit: Shift in Aggregate Demand) In this graph, initially the economy is at point E, with price P₀ and output Y. Aggregate demand is given by curve AD₀, and SRAS and LRAS represent, respectively, short-run and long-run aggregate supply. Now assume that the aggregate demand curve shifts so that it is represented by AD₁. The economy moves first to point ______ and then, in the long run, to point ______.

• A) A; D
• B) D; A
• C) C; B
• D) B; C

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Definitions:

Total Cost

The sum of fixed cost and variable cost.

ATC

Average Total Cost, which is the total cost of production divided by the quantity of output produced, encompassing both fixed and variable costs.

Plant Size

The physical capacity or output potential of a manufacturing or production facility.

Implicit Cost

The opportunity cost of using resources already owned by the firm for its current purpose, rather than their next best alternative use.