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ECS1501-25-Y Topics 12 -15

ECS1501-25-Y Topics 12 -15

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If a minimum wage is fixed above the equilibrium wage in a perfectly competitive labour market, an excess supply of labour (ie unemployment) will develop.

In a perfectly competitive market, the firm will maximise its profit where the price of labour (wage rate) equals the MRP.

True

False

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A change in the wage rate will leave the labour demand curve unchanged.

The introduction of a minimum wage below the equilibrium wage in a perfectly competitive labour market will have no impact on the level of wages and the level of employment.

This question is based on the following diagram which shows cost curves for Benny’s Bookworms, a perfectly competitive firm.

At which point would Benny’s Bookworms close down?

❌

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Use the diagram below which diagram shows the short-run conditions of a firm in a perfectly competitive market to answer the question.

In the long run, ____ firms will ____ the industry so that the market supply curve shifts to the _____, until prices ______ sufficiently so that all firms make a normal profit only.

new firms; enter; right; decrease.

existing firms; exit; left; increase.

new firms; enter; left; increase.

existing firms; exit; right; decrease.

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A profit-maximising firm sells its product for R300, but continues to produce even though it is making a loss. This suggests that

the marginal cost is less than the price.

❌

the average total cost is less than the price.

❌

the average variable cost is less than the price.

✅