Explain what happens to the short-run aggregate supply curve when output exceeds its potential
What will be an ideal response?
When output exceeds potential GDP, the high volume of output produced raises the demand for labor. The higher labor demand, in turn, bids up wages, increasing firms' labor costs. As a result, the short-run aggregate supply curve will eventually shift to the left because at any given price level firms will supply less output when their costs are higher.
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A short-run equilibrium occurs
A) at the intersection of the short-run aggregate supply curve and the aggregate demand curve. B) at the real GDP associated with full employment. C) at the intersection of the short-run aggregate supply curve and the long-run aggregate supply curve. D) at the intersection of the long-run aggregate supply curve and the aggregate demand curve.
As a manager holding an auction with correlated or common values, you want buyers to place bids that are ________ their estimated valuations and sellers to place bids that are ________ their estimated costs.
A) close to; close to B) close to; far from C) far from; close to D) far from; far from
A firm's profit is
a. greater if it is a corporation rather than if it is a sole proprietorship b. higher if it raises its price than if it does not c. lower if it lowers its price than if it does not d. never taxed by the government e. its revenue minus its costs
People often complain about price gouging after a disaster such as a wildfire. Suppose the government successfully prevented price increases due to the disaster. We would expect
A. reconstruction to take less time because the demand for materials would increase faster. B. reconstruction to take less time because the government could rebuild more quickly when people are not in the way. C. reconstruction never to occur. D. reconstruction to take longer because the quantity supplied of new materials would increase more slowly.