Final answer:
To eliminate an output gap caused by a leftward shift of the AD curve and restore long-run equilibrium in the AD/AS model, option C) wages and other factor prices would have to fall quickly. This would shift the SRAS curve to the right, closing the output gap.
Step-by-step explanation:
The question pertains to the Aggregate Demand/Aggregate Supply (AD/AS) model and long-run equilibrium. Specifically, it asks what would happen if there was a leftward shift of the AD curve, causing an output gap. To resolve this output gap and return to long-run equilibrium, option C) wages and other factor prices fell quickly is the correct answer. When wages and factor prices decrease, the cost of production goes down, which causes the SRAS curve to shift to the right since firms are able to produce more at every price level. This will close the output gap and restore equilibrium at the potential output level. In contrast, a higher level of productivity shifts the AS curve to the right, as firms can produce a greater quantity of output at every price level due to increased productivity over time.