(a) Suppose all firms in the economy set their prices on a cost-plus basis, so that the aggregate price level is a mark-up, m, over average prime costs. What does the aggregate supply (AS) curve look like in this case? (b) Suppose the demand for labour exhibits a diminishing marginal product of labour and there is no supply curve for labour. Re-derive the short run AS curve and compare it with that derived in (a).