Final answer:
The short-run aggregate supply curve is steeper above the full-employment output than below it because it slopes upward when the price level for outputs rises with fixed input prices, providing firms an incentive to increase production. It becomes almost vertical at potential GDP as resources become fully utilized.
Step-by-step explanation:
The question is about the short-run aggregate supply curve (AS), which is a graphical representation of the relationship between the price level of outputs and the quantity of goods and services that firms are willing to supply. The correct answer to the question is B) the aggregate supply curve is steeper above the full-employment output than below it. In the short run, the AS curve slopes upward because as price levels for outputs rise and inputs remain fixed, firms are incentivized to increase production to earn higher profits. However, once the economy reaches the potential GDP or full-employment level, the AS curve becomes steeper or nearly vertical. At this point, increases in the price level will not significantly increase the output because the economy's resources are fully utilized.
At the far left of the AS curve, where the level of output is significantly below potential GDP, there is high unemployment, and factories may be underutilized. Therefore, a small increase in the prices of outputs may lead to a considerable increase in aggregate supply, as there is ample slack in the economy to increase production without a rise in input prices.