Using the graph of the long run and short run aggregate supply and demand, show how GDP generated at...

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Using the graph of the long run and short run aggregate supply and demand, show how GDP generated at full employment is the potential output the economy can generate.
In order to better explain this concept, assume that in the short run, wages and prices are flexible enough to adjust, that at full employment, firms and workers are able to negotiate nominal wages, which will shift the natural rate of GDP and the natural rate of unemployment are defined in the long run and represented by a vertical long run aggregate supply curve.

Robert · Accepted Answer

1. Show that a monopolist will never produce on the inelastic portion of the demand curve and 
provide an explanation. 
A monopoly firm or industry never produce and sell on the inelastic portion of the demand 
curve. The reason for this decision is that the marginal revenue at the inelastic portion of the 
demand curve is negative.

Using the graph of the long run and short run aggregate supply and demand, show how GDP generated at full employment is the potential output the economy can generate. In order to better explain this...

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