Which of the following is true for perfect competition, monopolistic competition, and monopoly?
A. The product of all firms is homogeneous.
B. Firms will earn zero economic profits in the long run.
C. Short-run profits are maximized when marginal cost equals marginal revenue.
D. Price is greater than marginal cost at the profit-maximizing quantity.
Answer: C
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Other things held constant, investment in physical capital will increase: a. labor productivity. b. national income
c. wages. d. all of the above
The term full employment implies an unemployment rate of:
a. zero b. approximately 5% c. approximately 10% d. 100%
Answer the following statement(s) true (T) or false (F)
1. To know if the addition of a worker will add to a firm’s profits you must know both the marginal revenue product and the marginal resource cost. 2. Marginal revenue product is calculated by multiplying the marginal product times the marginal resource cost. 3. The equilibrium wage (W*) is the median cost of labor, with half of the workers making more and half making less. 4. The substitution effect describes the tendency of workers at a low wage rate to have a high rate of absenteeism. 5. If the substitution effect is stronger than the income effect, the individual’s labor supply curve is backward bending.
The basic difference between macroeconomics and microeconomics is:
What will be an ideal response?