What is the long run aggregate supply curve primarily fixed at?

The long-run aggregate supply curve is primarily fixed at potential output, which represents the maximum level of output an economy can sustain over the long term without increasing inflation. This potential output is determined by factors such as technology, resources, and institutional structures, and reflects the economy's capacity to produce goods and services when all resources are utilized efficiently.

In the long run, the economy tends to adjust to its potential output, achieving full employment where all resources are optimally employed. This is different from current output, which can fluctuate due to short-term economic conditions and may be above or below potential output. Similarly, market equilibrium and short-run output relate to temporary market dynamics rather than the stable conditions associated with potential output in the long run. Thus, the long-run aggregate supply curve accurately aligns with the economy's potential output, making it a crucial concept in understanding macroeconomic equilibrium and growth over an extended period.