Suppose Demand Conditions in Industries X and Y Are Identical

question 31

Multiple Choice

Suppose demand conditions in industries X and Y are identical but that productivity increases by 5% in industry X and 2% in industry Y.If economy-wide productivity and the average wage each rise by 3%,we should expect that unit labor costs will:

• A)increase by the same amount in both industries,in accord with the overall increase in the average wage
• B)increase in both industries,but more in industry X than industry Y
• C)increase in industry X and decrease in industry Y
• D)decrease in industry X and increase in industry Y

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Definitions:

Per-Unit Tax

A tax that is levied on a product based on a fixed amount per unit sold, not based on the value of the product.

Quantity Tax

A tax that is levied on a specific amount or quantity of a good or service, rather than on its value.

Lost Revenue

Revenue that was expected but not received, often due to unforeseen circumstances or decisions leading to missed opportunities.

Long-Run Cost Curve

A graphical representation showing the minimum cost at which any given level of output can be produced in the long run, where all inputs are variable.