the more elastic the demand for the good labor produces, the less elastic the demand for labor. True or False
When a monopolistically competitive firm is in long-run equilibrium, average total cost is at its minimum. True or False
To determine the answer to the first question, we need to understand the relationship between the elasticity of demand for a good and the elasticity of demand for labor.
The elasticity of demand measures the responsiveness of demand to a change in price or other factors. For a good, if the demand is more elastic, it means that the quantity demanded is more responsive to changes in price. On the other hand, if the demand is less elastic, it means that the quantity demanded is less responsive to price changes.
Now, when we talk about the elasticity of demand for labor, it refers to the responsiveness of the demand for labor to changes in the wage rate or other factors. If the demand for labor is more elastic, it means that the quantity of labor demanded is more responsive to changes in the wage rate. Conversely, if the demand for labor is less elastic, it means that the quantity of labor demanded is less responsive to changes in the wage rate.
Based on this understanding, the statement "the more elastic the demand for the good labor produces, the less elastic the demand for labor" is FALSE. The elasticity of demand for the good labor produces does not directly influence the elasticity of demand for labor. These two elasticities are determined by different factors and can have different values.
Moving on to the second question, in a monopolistically competitive market, firms have some degree of market power, but they face competition from other firms. In the long run, if a monopolistically competitive firm is in equilibrium, it means that it is making normal profits, also known as zero economic profits. This occurs when the average total cost (ATC) equals the price charged to consumers.
However, it's important to note that this long-run equilibrium does not necessarily mean that the ATC is at its minimum. In a monopolistically competitive market, firms may operate with higher costs than perfectly competitive firms due to product differentiation, advertising expenses, or other factors. Therefore, the statement "When a monopolistically competitive firm is in long-run equilibrium, average total cost is at its minimum" is FALSE.
In summary:
- The statement about the relationship between the elasticity of demand for the good labor produces and the elasticity of demand for labor is FALSE.
- The statement about the average total cost being at its minimum when a monopolistically competitive firm is in long-run equilibrium is FALSE.