Question 1

The steeper the labor supply curve,

Accepted Answer

The steeper the labor supply curve, the more sensitive workers are to changes in the wage rate. This means that a monopsonist can pay a lower wage and still be able to hire the same quantity of labor. Therefore, the lower the wage the monopsonist pays.

Question 2

If a monopolist in the output market purchases its monopoly supplier of labor,consumers benefit.

Accepted Answer

The firm now pays a competitive price for its labor instead of the monopoly price.This lower wage shifts the firm's marginal cost curve downward.The result is a lower price charged to consumers.

Question 3

If a firm has market power in the output market but buys labor in a competitive market,it will hire the same quantity of labor that a competitive firm will.

Accepted Answer

Since the firm has market power,it must lower price if it wishes to sell more.It will wish to sell fewer units than a competitive firm,and,therefore,hire less labor than a competitive firm does.

Question 4

For the monopsonist,marginal expenditure is greater than the wage rate because the monopsonist

Accepted Answer

A monopsonist must increase the wage rate for all units of labor to attract additional units of labor, which means the marginal expenditure (the additional cost of hiring one more unit of labor) is greater than the wage rate paid to the newly hired labor because it includes the increased wages for all previously hired workers as well.

Question 5

For a monopsonist,the labor supply curve is upward sloping because

Accepted Answer

A monopsonist is the sole buyer in a labor market, so it faces an upward-sloping labor supply curve because it must pay higher wages to attract more workers.

Question 6

Suppose the labor market is competitive,the supply curve of labor is upward sloping,and the amount of capital is fixed.If the output market changes from a competitive market to a monopoly,what is the effect on its demand for labor? Explain.

Accepted Answer

The answer of Suppose the labor market is competitive,the supply...

Question 7

If the supply of labor to a monopsonist is everywhere unit elastic,then the wage will equal

Accepted Answer

The answer of If the supply of labor to a...

Question 8

A monopsonist faces an upward-sloping labor supply curve.This means that his marginal expenditures on labor are

Accepted Answer

A monopsonist, being the sole buyer of labor in a market, faces an upward-sloping labor supply curve. This means that to attract additional workers, the monopsonist must increase the wage rate. This increase applies not just to the additional worker(s) but to all workers already employed, making the marginal expenditure on labor (the additional cost of hiring one more worker) greater than the wage of the additional worker alone. This encompasses the wage increase for the additional worker (A), the wage plus the increase due to hiring one more worker (B), and the fact that hiring more workers requires paying all workers more (C).

Question 9

A Cournot duopoly firm's labor demand curve

Accepted Answer

In a Cournot duopoly, the labor demand curve is derived from the marginal revenue product of labor, which is P[1 + 1/(2e)] * MPL, where P is the price, e is the elasticity of demand, and MPL is the marginal product of labor.

Question 10

Explain why baseball ticket prices may increase when a team pays a new player a large salary,but will remain unchanged when a current player gets a salary increase.

Accepted Answer

The answer of Explain why baseball ticket prices may increase...

Question 11

If a firm buys some labor in a competitive market and some labor as a monopsonist,the firm is most likely to

Accepted Answer

In a competitive market, firms are price takers, including for wages, meaning they pay the market wage. As a monopsonist (a single buyer in the market), the firm has power to set wages and typically pays a lower wage than in competitive markets. Therefore, the firm is likely to pay a higher wage to the labor purchased in the competitive market compared to what it pays in a market where it has monopsony power.

Question 12

Under monopsony,the wage rate

Accepted Answer

Under monopsony, the employer has market power and can set the wage rate below the marginal revenue product of labor, thus paying workers less than what they would receive under perfect competition. Therefore, choice C is the correct answer. Choices A and B are not true because the wage rate is set by the employer, not determined by the marginal product or revenue product of labor. Choice D is also not true because monopsony leads to lower wages, not higher ones.

Question 13

If a firm takes the wage as given,then the firm's marginal expenditure on labor curve is

Accepted Answer

If a firm takes the wage as given, then it will hire workers up to the point where the marginal cost of hiring an additional worker (i.e., the wage) equals the marginal revenue product of that worker. The labor supply curve represents the wage that workers are willing to work at, given their preferences and opportunity costs. Therefore, the firm's marginal expenditure on labor curve will be identical to the labor supply curve. This is because the firm cannot influence the wage - it must take it as given.

Question 14

If the supply of labor to a monopsonist is everywhere unit elastic,and the marginal expenditure equals $1,then the wage will equal

Accepted Answer

The answer of If the supply of labor to a...

Question 15

Because the labor supply curve for a monopsonist is upward sloping,the monopsonist

Accepted Answer

Since the labor supply curve for a monopsonist is upward sloping, the monopsonist must increase the wage to attract more units of labor. This is because the monopsonist is the only buyer of labor in the market and workers have no other option but to sell their labor to the monopsonist, giving the monopsonist some market power to set the wage below the competitive level. However, if the monopsonist wants to hire more units of labor, it must increase the wage to compensate for the cost of attracting additional workers.

Question 16

Assume that the market demand for a good is p = 100 - Q.Assume that the marginal product of labor is 1 and the firm can get all the labor it needs at a wage equal to 5.Compare the quantity of labor hired if the output market is competitive with the quantity hired if the output market is a monopoly.

Accepted Answer

The answer of Assume that the market demand for a...

Question 17

Suppose n identical Cournot firms purchase labor in a competitive labor market.How is the market demand for labor affected by the number of firms in the market?

Accepted Answer

The answer of Suppose n identical Cournot firms purchase labor...

Question 18

If a firm takes the wage as given,then the supply curve of labor to that firm is

Accepted Answer

When a firm takes the wage as given, it means the firm has no power to influence the wage rate, implying it can hire as many workers as it wants at the market wage. This scenario results in a horizontal supply curve of labor to the firm, indicating wage rigidity at the market-determined rate.

Question 19

Explain why consumers benefit from a merger between a monopoly producer and its monopoly supplier of labor.

Accepted Answer

The answer of Explain why consumers benefit from a merger...

Question 20

A union's success in raising the wage depends on

Accepted Answer

A union's success in raising wages depends on a combination of factors, including the elasticity of the demand for the goods or services produced by the workers, the ability of union members to act collectively in negotiating with management, and the share of the labor market that is unionized. All of these factors can influence whether the union is able to achieve its wage goals.

Quiz 15: Factor Markets