Figure 14.3.1
-Refer to Figure 14.3.1 above. The marginal expenditure lies above the average expenditure because:
A) the buyer of the input has monopoly power .
B) the seller of the input has monopoly power.
C) the buyer of the input has monopsony power.
D) the seller of the input has monopsony power.

Question

Figure 14.3.1
-Refer to Figure 14.3.1 above. The marginal expenditure lies above the average expenditure because:
A) the buyer of the input has monopoly power . 
B) the seller of the input has monopoly power. 
C) the buyer of the input has monopsony power. 
D) the seller of the input has monopsony power.

Quizplus · Accepted Answer

The marginal expenditure lies above the average expenditure because the buyer of the input has monopsony power, meaning they are the only purchaser of the input in the market and can influence the market price by controlling the quantity demanded. As they increase their demand for the input, the price will increase, which results in a higher marginal expenditure.

Figure 14.3.1 -Refer to Figure 14.3.1 Above. the Marginal Expenditure Lies Above