Which of the following statements is TRUE about the long-run and short-run aggregate supply curve in the classical model?
A. The long-run aggregate supply curve is vertical, and the short-run curve is horizontal.
B. The long-run and short-run curves start out horizontal and eventually become vertical.
C. The long-run curve is vertical, and there is no short-run curve since all adjustments occur quickly.
D. The long-run aggregate supply curve is not defined, and the short run curve is vertical.
Answer: C
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As existing firms exit an increasing-cost industry
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