alleryStart learning →Why does the aggregate supply curve slope upward?
ABecause input costs always outrun output prices
BBecause regulation requires more output at high prices
CBecause buyers always want more when prices climb
DHigher output prices with fixed input costs reward extra output
Answer & Solution
Correct answer: D. Higher output prices with fixed input costs reward extra output
1. The AS curve is built on the assumption that input prices, like wages, stay fixed while the output price level changes.
2. When the price firms receive for output rises but their costs do not, each unit sold becomes more profitable.
3. That extra profit incentive is what pulls a greater quantity of real GDP out of the economy.
4. Option D describes a demand-side idea, and it also contradicts the law of demand, so it is wrong on two counts.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 10 "The Aggregate Demand/Aggregate Supply Model", section 10.2 | Building a Model of Aggregate Demand and Aggregate Supply_
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