Question 1

Exhibit 11-12 A monopsonist

In Exhibit 11-12, at the profit-maximizing level of employment, the firm's MFC is equal to ____ and the firm's MRP is equal to ____.

Accepted Answer

The answer of Exhibit 11-12 A monopsonist

In Exhibit 11-12, at...

Question 2

Exhibit 11-12 A monopsonist

In Exhibit 11-12, a profit-maximizing firm faced with this labor market will hire ____ workers and pay a wage of ____.

Accepted Answer

The answer of Exhibit 11-12 A monopsonist

In Exhibit 11-12, a...

Question 3

BigBiz, a local monopsonist, currently hires 50 workers and pays them $6 per hour. To attract an additional worker to its labor force, BigBiz would have to raise the wage rate to $6.25 per hour. What is BigBiz's marginal factor cost?

Accepted Answer

The marginal factor cost is the additional cost of hiring one more worker. BigBiz must raise the wage for all 51 workers to $6.25, so the total cost increases from $300 (50 workers x $6) to $318.75 (51 workers x $6.25). The marginal factor cost is $318.75 - $300 = $18.75.

Question 4

Suppose a firm can hire 100 workers at $8.00 per hour but must pay $8.05 per hour to hire 101 workers. Marginal factor cost (MFC) for the 101st worker is approximately equal to:

Accepted Answer

The MFC for the 101st worker is calculated by the additional cost to hire one more worker, which includes the extra $0.05 per hour for the 101st worker plus the additional $0.05 per hour for the initial 100 workers (since the wage rate increases for all workers, not just the 101st). Therefore, MFC = $0.05 * 101 = $5.05 + $8.00 (the original wage for the 100 workers) = $13.05.

Question 5

Wage and MFC differ for a monopsonist because:

Accepted Answer

In a monopsony, when the employer decides to increase the wage to attract additional workers, this higher wage must be paid to all employees, not just the newly hired ones. This discrepancy between the wage paid and the marginal factor cost (MFC) arises because the MFC includes the cost of raising the wage for all existing employees, making it higher than the wage of the next worker hired.

Question 6

Exhibit 11-13 A monopsonist's supply and marginal revenue product data

In Exhibit 11-13, how many workers will the monopsonist hire?

Accepted Answer

The answer of Exhibit 11-13 A monopsonist's supply and marginal...

Question 7

Lorna's Lumberyard is a monopsony. Lorna estimates that at a wage of $10, 100 workers would be willing to work for her. Similarly, at a wage of $12, 200 workers would be willing to work. Her marginal factor cost is:

Accepted Answer

Marginal factor cost (MFC) is the additional cost of hiring one more unit of labor. 
Using the midpoint formula, we can calculate the MFC: 
MFC = (change in wage / change in quantity) * (quantity / wage)

MFC = ($12 - $10) / ((200 - 100) / 2) * (100 + 200) / 2 
MFC = $2 / 50 * 150 
MFC = $6

Therefore, the MFC is $6, which means that Lorna's best choice is to increase the wage to $12, as at this wage she will be able to hire more workers while still paying less than the MFC.

Question 8

The MFC curve increases for a monopsonist because:

Accepted Answer

The Marginal Factor Cost (MFC) curve increases for a monopsonist because as they hire more workers, they must increase the wage rate not just for the additional workers but for all previously hired workers as well, due to the upward-sloping supply curve of labor. This makes the cost of hiring each additional worker higher than the previous one, leading to an increasing MFC curve.

Question 9

Suppose a monopsonist hires its second worker and this hiring has a marginal factor cost of $75 per day. If the market wage is now $62.50 per day, what was the first employee earning when she worked alone?

Accepted Answer

In a monopsony market, a firm is the only buyer of labor and it faces an upward sloping supply curve of labor. This means that in order to hire additional workers, the firm has to pay a higher wage not only to the new worker but also to the previous workers. The marginal factor cost (MFC) is the additional cost of hiring one more worker and is greater than the wage rate in a monopsony market.

In this case, the MFC of hiring the second worker is $75 per day, which is higher than the market wage of $62.50. This means that the firm has to increase the wages of both the first and second workers to attract them to work for the firm. However, we don't know what the first employee was earning when she worked alone.

Let's assume that the first employee was earning a wage of $W when she worked alone. When the firm hires the second worker, it has to increase the wage rate of the first worker by the amount of MFC, which is $75 - $62.50 = $12.50 per day. This means that the new wage rate for the first worker is $W + $12.50 per day. The total wage bill for the two workers is now:

Total wage bill = ($W + $12.50) + $62.50 = $W + $75

We know that this is the MFC of hiring the second worker. Therefore, we can set up the following equation:

MFC = $75 = Total wage bill for two workers - Wage bill for one worker = ($W + $12.50 + $62.50) - $W = $75

Solving for $W, we get:

$W = $50

Therefore, the first employee was earning a wage of $50 per day when she worked alone. The correct answer is (C).

Question 10

Explain why a monopsonist's marginal factor cost curve must lie above its labor supply curve.

Accepted Answer

The answer of Explain why a monopsonist's marginal factor cost...

Question 11

Exhibit 11-11 Labor wage and cost data

In Exhibit 11-11, the total wage cost of hiring 12 employees is equal to:

Accepted Answer

The answer of Exhibit 11-11 Labor wage and cost data

In...

Question 12

Exhibit 11-8 A labor market

If the labor market shown in Exhibit 11-8 is a monopsony, the wage rate and number of workers employed will be determined at point:
​

Accepted Answer

The answer of Exhibit 11-8 A labor market

If the labor...

Question 13

Exhibit 11-8 A labor market

If the labor market shown in Exhibit 11-8 is competitive, the wage rate and number of workers employed will be determined at point:
​

Accepted Answer

Point F is the intersection of the supply and demand curves where they cross at equilibrium. At this point, the wage rate and number of workers employed are both at their market-clearing levels, ensuring that there is no excess supply or demand in the labor market. Therefore, point F represents the equilibrium in the competitive labor market.

Question 14

Exhibit 11-12 A monopsonist

In Exhibit 11-12, we know this exhibit shows a monopsonistic labor market because:

Accepted Answer

A monopsonistic labor market is characterized by the employer having market power, meaning they can affect the wage rate offered to workers. This exhibit shows a monopsonistic labor market because the MFC (marginal factor cost) curve lies above the supply of labor curve, indicating that the employer must offer a higher wage to attract more workers. This creates a situation where the employer has some market power to affect the wage rate. The fact that the MRP (marginal revenue product) curve slopes down is not a necessary condition for identifying a monopsonistic labor market. Similarly, a horizontal market supply of labor curve and an MRP curve lying below the supply of labor curve are not characteristics unique to monopsonistic labor markets.

Question 15

A monopsony will:

Accepted Answer

A monopsony is a market situation where there is only one buyer of a particular good or service, in this case, labor. The monopsonistic employer can hire more workers at a lower wage than a competitive employer, but chooses not to do so because it incurs a higher marginal factor cost. In order to find the optimal quantity of labor to hire, the monopsonistic employer employs a quantity of labor where the marginal revenue product (MRP) equals the marginal factor cost (MFC), which is usually higher than the wage rate. Therefore, the best choice is C: employ a quantity of labor where the MRP equals the MFC.

Question 16

For a monopsonist, the supply of labor facing the firm is:

Accepted Answer

A monopsonist is the only buyer in the market and therefore has significant market power to set the wage rate. The supply of labor facing the firm is identical to the supply curve facing the market because the monopsonist is the only buyer and has a significant influence on the wage rate. The supply curve is not perfectly horizontal because the monopsonist cannot hire an unlimited amount of labor at a fixed wage rate. The summation of each firm's demand for labor is not relevant to a monopsonist since it is the only buyer in the market.

Question 17

A monopsonist's marginal factor cost (MFC) curve lies above its supply curve because the firm must:

Accepted Answer

A monopsonist is the only buyer of a factor of production and therefore has market power in the factor market. This means that when the monopsonist wants to hire more units of the factor, it must increase the factor price in order to attract more supply. As a result, the marginal factor cost curve is above the supply curve, reflecting the additional cost to the monopsonist of hiring more units of the factor.

Question 18

Exhibit 11-13 A monopsonist's supply and marginal revenue product data

Use Exhibit 11-13. What wage rate will the monopsonist pay the workers?

Accepted Answer

The monopsonist will hire workers up to the point where the marginal cost of hiring an additional worker equals the marginal revenue product of that worker. In Exhibit 11-13, we can see that the marginal revenue product of the first worker hired is $20, and this decreases as more workers are hired. The cost to the monopsonist of hiring the first worker is $8, and this increases as more workers are hired. The monopsonist will therefore hire workers up to the point where the marginal cost of the last worker hired (in this case, the fourth worker) equals the marginal revenue product of that worker. From the table, we can see that the marginal cost of the fourth worker is $12, and the marginal revenue product of the fourth worker is also $12. Therefore, the monopsonist will hire four workers and pay each worker a wage rate of $12, which is the wage rate where the marginal cost of hiring an additional worker and the marginal revenue product of that worker are equal.

Question 19

A monopsonist can pick the ____, while a monopolist can pick the ____.

Accepted Answer

A monopsonist, being the sole buyer in a market, can choose the wage it will pay, while a monopolist, as the sole seller, can choose the price it will charge for its product.

Question 20

A monopsony owner believes that hiring an additional worker would increase the company's revenue by $150 per day. We can conclude that the monopsony pays its workers:

Accepted Answer

If the monopsony was paying exactly or more than $150 per day, they would not be able to increase revenue by hiring an additional worker for that wage. Therefore, the monopsony must be paying less than $150 per day to its workers. The information given does not allow us to determine the exact wage, so option C is the best choice. Option D is incorrect because there is no information to suggest that the monopsony pays its workers exactly half of the revenue increase from hiring an additional worker.

Quiz 11: Labor Markets

Exhibit 11-12 A monopsonist In Exhibit 11-12, at the profit-maximizing level of employment, the firm's MFC is equal to and the firm's MRP is equal to .

Exhibit 11-12 A monopsonist In Exhibit 11-12, a profit-maximizing firm faced with this labor market will hire workers and pay a wage of .

BigBiz, a local monopsonist, currently hires 50 workers and pays them $6 per hour. To attract an additional worker to its labor force, BigBiz would have to raise the wage rate to $6.25 per hour. What is BigBiz's marginal factor cost?

Suppose a firm can hire 100 workers at $8.00 per hour but must pay $8.05 per hour to hire 101 workers. Marginal factor cost (MFC) for the 101st worker is approximately equal to:

Wage and MFC differ for a monopsonist because:

Exhibit 11-13 A monopsonist's supply and marginal revenue product data In Exhibit 11-13, how many workers will the monopsonist hire?

Lorna's Lumberyard is a monopsony. Lorna estimates that at a wage of $10, 100 workers would be willing to work for her. Similarly, at a wage of $12, 200 workers would be willing to work. Her marginal factor cost is:

The MFC curve increases for a monopsonist because:

Suppose a monopsonist hires its second worker and this hiring has a marginal factor cost of $75 per day. If the market wage is now $62.50 per day, what was the first employee earning when she worked alone?

Explain why a monopsonist's marginal factor cost curve must lie above its labor supply curve.

Exhibit 11-11 Labor wage and cost data In Exhibit 11-11, the total wage cost of hiring 12 employees is equal to:

Exhibit 11-8 A labor market If the labor market shown in Exhibit 11-8 is a monopsony, the wage rate and number of workers employed will be determined at point:

Exhibit 11-8 A labor market If the labor market shown in Exhibit 11-8 is competitive, the wage rate and number of workers employed will be determined at point:

Exhibit 11-12 A monopsonist In Exhibit 11-12, we know this exhibit shows a monopsonistic labor market because:

A monopsony will:

For a monopsonist, the supply of labor facing the firm is:

A monopsonist's marginal factor cost (MFC) curve lies above its supply curve because the firm must:

Exhibit 11-13 A monopsonist's supply and marginal revenue product data Use Exhibit 11-13. What wage rate will the monopsonist pay the workers?

A monopsonist can pick the , while a monopolist can pick the .

A monopsony owner believes that hiring an additional worker would increase the company's revenue by $150 per day. We can conclude that the monopsony pays its workers:

Quiz 11: Labor Markets

Exhibit 11-12 A monopsonist In Exhibit 11-12, at the profit-maximizing level of employment, the firm's MFC is equal to ____ and the firm's MRP is equal to ____.

Exhibit 11-12 A monopsonist In Exhibit 11-12, a profit-maximizing firm faced with this labor market will hire ____ workers and pay a wage of ____.

BigBiz, a local monopsonist, currently hires 50 workers and pays them $6 per hour. To attract an additional worker to its labor force, BigBiz would have to raise the wage rate to $6.25 per hour. What is BigBiz's marginal factor cost?

Suppose a firm can hire 100 workers at $8.00 per hour but must pay $8.05 per hour to hire 101 workers. Marginal factor cost (MFC) for the 101st worker is approximately equal to:

Wage and MFC differ for a monopsonist because:

Exhibit 11-13 A monopsonist's supply and marginal revenue product data In Exhibit 11-13, how many workers will the monopsonist hire?

Lorna's Lumberyard is a monopsony. Lorna estimates that at a wage of $10, 100 workers would be willing to work for her. Similarly, at a wage of $12, 200 workers would be willing to work. Her marginal factor cost is:

The MFC curve increases for a monopsonist because:

Suppose a monopsonist hires its second worker and this hiring has a marginal factor cost of $75 per day. If the market wage is now $62.50 per day, what was the first employee earning when she worked alone?

Explain why a monopsonist's marginal factor cost curve must lie above its labor supply curve.

Exhibit 11-11 Labor wage and cost data In Exhibit 11-11, the total wage cost of hiring 12 employees is equal to:

Exhibit 11-8 A labor market If the labor market shown in Exhibit 11-8 is a monopsony, the wage rate and number of workers employed will be determined at point: ​

Exhibit 11-8 A labor market If the labor market shown in Exhibit 11-8 is competitive, the wage rate and number of workers employed will be determined at point: ​

Exhibit 11-12 A monopsonist In Exhibit 11-12, we know this exhibit shows a monopsonistic labor market because:

A monopsony will:

For a monopsonist, the supply of labor facing the firm is:

A monopsonist's marginal factor cost (MFC) curve lies above its supply curve because the firm must:

Exhibit 11-13 A monopsonist's supply and marginal revenue product data Use Exhibit 11-13. What wage rate will the monopsonist pay the workers?

A monopsonist can pick the ____, while a monopolist can pick the ____.

A monopsony owner believes that hiring an additional worker would increase the company's revenue by $150 per day. We can conclude that the monopsony pays its workers:

Exhibit 11-12 A monopsonist In Exhibit 11-12, at the profit-maximizing level of employment, the firm's MFC is equal to and the firm's MRP is equal to .

Exhibit 11-12 A monopsonist In Exhibit 11-12, a profit-maximizing firm faced with this labor market will hire workers and pay a wage of .

Exhibit 11-8 A labor market If the labor market shown in Exhibit 11-8 is a monopsony, the wage rate and number of workers employed will be determined at point:

Exhibit 11-8 A labor market If the labor market shown in Exhibit 11-8 is competitive, the wage rate and number of workers employed will be determined at point:

A monopsonist can pick the , while a monopolist can pick the .