The SRAS curve is upward rising because:

A) a higher aggregate price level leads to lower output as the costs of production increase.

B) a higher aggregate price level leads to higher output since most production costs are fixed in the short run.

C) a lower aggregate price level leads to higher output since production costs tend to fall in the short run.

D) a lower aggregate price level leads to higher profit and higher productivity.

Question

Business

Maximus Hensley

9 March, 00:52

The SRAS curve is upward rising because:

A) a higher aggregate price level leads to lower output as the costs of production increase.

B) a higher aggregate price level leads to higher output since most production costs are fixed in the short run.

C) a lower aggregate price level leads to higher output since production costs tend to fall in the short run.

D) a lower aggregate price level leads to higher profit and higher productivity.

+4

Answers (1)

Know the Answer?

Hadassah Page · Answer 1

B) a higher aggregate price level leads to higher output since most production costs are fixed in the short run.

Explanation:

In the short run suppliers are willing to produce or supply more output at higher prices because their costs are fixed in the short run and in order to increase output they will need to face more fixed costs so they will only increase output if the prices increase so that they can be profitable. For example a cement factory producing at maximum capacity cannot produce more output as they will need to increase their capacity to do so, so when they increase their capacity their fixed costs rise and they will need to increase prices in order to be profitable, so in the short run only when prices increase, the producers will increase capacity or output.