At firm M,labour costs increased from $158 to $170 when the last worker was hired.If the wage rate is __________ then firm M must be a(n)__________.

Question

Quizplus · Accepted Answer

If the labour costs increased from $158 to $170, then the additional cost of hiring the last worker was $12. The wage rate refers to the cost of hiring one worker, so if the wage rate is less than $12, then the firm must be a monopsonist (a sole buyer of labour in the market) because it was able to increase the number of workers while paying a lower wage rate for each. If the wage rate was more than $12, the extra cost of hiring the last worker would have been more than $12. If the wage rate was exactly $12, the firm could still be a monopsonist or a perfect competitor, but there is not enough information to determine this.

At Firm M,labour Costs Increased from $158 to $170 When