Excess capacity is a characteristic of monopolistically competitive firms. What does excess capacity mean?
A) It means that firms hire more than the minimum number of workers needed to produce the profit-maximizing level of output.
B) It means that firms build plants that are not large enough to achieve minimum efficient scale.
C) It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves.
D) It means that firms produce with inefficient combinations of resources.
C
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The figure above shows the labor market in a region. If a minimum wage of $8 an hour is imposed, then there are ________ unemployed workers
A) 20,000 B) 40,000 C) 60,000 D) 80,000 E) zero
At a peak in the business cycle, the macroeconomic equilibrium is ________ the level of potential real GDP
A) greater than B) equal to C) less than D) falling below E) None of the above answers is always correct because the relationship depends on whether the previous phase of the business cycle had been a recession or an expansion.