FIGURE 23-3 Refer to Figure 23-3

Multiple Choice

FIGURE 23-3 Refer to Figure 23-3.Which of the following statements best describes the supply side of Economy A in its current equilibrium position?

A) Unit costs are rising,but firms can produce more output by employing standby capacity and overtime labour,for example,with no increase in the price level.
B) Firms are producing well below their capacity and are willing to produce more only if prices rise.
C) Unit costs are rising rapidly as firms are producing beyond their capacity.Firms will produce more only if prices increase.
D) Firms are producing well below their capacity and are willing to produce more output with no increase in price.
E) Unit costs are rising,but firms are able to produce more output with no increase in the price level because there is excess capacity in the economy.