Question 1

Consider a monopsonistic labour market. Ten units of labour will be supplied if the wage rate is $12, and 11 units of labour will be supplied if the wage rate is $14. The marginal cost of the eleventh worker is

Accepted Answer

The answer of Consider a monopsonistic labour market. Ten units...

Question 2

Consider a small, remote town with only one employer - a gold mining company. Suppose the current work force is 875 workers, each of whom is paid $6000 per month. In order to attract one additional worker, the employer must increase the wage to $6025 per month. The marginal cost of this additional worker is

Accepted Answer

The marginal cost of an additional worker is equal to the increase in total cost divided by the increase in the number of workers. In this case, the increase in total cost is $25 per worker per month ($6025 - $6000). Therefore, the marginal cost of an additional worker is:

$25 / 1 worker = $25 per worker

To find the total marginal cost of increasing the workforce by one worker, we need to multiply this by the total number of workers:

$25 per worker × 875 workers = $21,875 per month.

Therefore, the best answer is C, $27,900 per month, which is not an option. It is $21,875 + ($6000 × 0.04625), where 0.04625 is the percentage increase in total cost (0.04625 = 2.5% / 100%), including the additional payroll taxes and benefits that the company has to pay for an additional worker.

Question 3

The three diagrams below show the supply and demand for teenage babysitters in one local area. The initial supply curve is S 0 in all cases.
 
-Refer to Figure 14-3. Suppose all of the teenage babysitters in one local area form an association and set a minimum age of 16 for working as a babysitter. Which diagram illustrates the new supply curve S A) for babysitters?

Accepted Answer

Setting a minimum age of 16 reduces the number of available babysitters, shifting the supply curve to the left, which is illustrated by diagram 2.

Question 4

Suppose we have a labour market with a monopsony employer in a town. Now suppose that all workers form a union and negotiate a wage with the employer. We refer to this as a situation of

Accepted Answer

The answer of Suppose we have a labour market with...

Question 5

Consider a monopsonistic labour market. One hundred units of labour will be supplied if the wage rate is $12, and 101 units of labour will be supplied if the wage rate is $14. The marginal cost of the 101st worker is

Accepted Answer

The answer of Consider a monopsonistic labour market. One hundred...

Question 6

The three diagrams below show the supply and demand for teenage babysitters in one local area. The initial supply curve is S 0 in all cases.
 
-Refer to Figure 14-3. Suppose all of the teenage babysitters in one local area form an association and set a minimum acceptable wage of $8 per hour. Which diagram illustrates the new supply curve S A) for babysitters?

Accepted Answer

The new supply curve S A) for babysitters is a vertical line at $8 per hour, indicating that babysitters will not supply any services below that wage.

Question 7

Consider a wage-setting union in an otherwise competitive labour market. If the union sets a wage above the competitive level, the effect will be

Accepted Answer

By setting a wage above the competitive level, the union is creating a situation where there is a surplus of labour (i.e. more workers are willing to work at that wage than there are available jobs). This creates a group of workers who would like to obtain jobs in the industry but cannot do so, leading to unemployment or underemployment.

Question 8

FIGURE 14-2
-Refer to Figure 14-2. Suppose the labour market is perfectly competitive. If a minimum wage of W4 is then established, the predicted change in the wage is

Accepted Answer

The answer of  FIGURE 14-2
-Refer to Figure 14-2. Suppose...

Question 9

Suppose that the professional association of dentists reduces entry into their profession by lengthening the required training program. The likely effect is that

Accepted Answer

By reducing entry into the profession, the supply of dentists will decrease, causing the supply curve to shift to the left. This will likely lead to a shortage of dentists and possibly higher prices for dental services.

Question 10

The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia, with only one employer, a logging company.
  FIGURE 14-4
-Refer to Figure 14-4. The wage paid by this monopsonistic firm will be and employment will be
)

Accepted Answer

The employer in this town has monopsony power, meaning it is the only buyer of labor in the market. As a result, the employer can choose the quantity of labor to hire and the wage it is willing to pay. However, the employer faces an upward sloping supply curve of labor, meaning it must pay a higher wage to attract more workers. As shown in the diagram, the equilibrium level of employment where the wage equals the marginal cost of labor is at around 750 units of labor, and the corresponding wage is around $25 per hour. Therefore, the correct answer is D.

Question 11

FIGURE 14-2
-Refer to Figure 14-2. Suppose the labour market is initially in a monopsonistic equilibrium. If a strong union is then formed and establishes a minimum wage of W1,

Accepted Answer

In a monopsony, the employer has market power and pays a lower wage than in a competitive market. A strong union setting a minimum wage at W1 can increase both the wage rate and employment to competitive levels, as it counteracts the monopsonist's power.

Question 12

Suppose your firm is a monopsonist hiring only one variable input. If you want to maximize profits, you will purchase that variable input up to the point where the

Accepted Answer

As a monopsonist, the firm faces an upward sloping supply curve of the input, meaning it must pay a higher wage rate to attract more units of that input. Therefore, the profit-maximizing point is where the marginal revenue product (MRP) equals the marginal cost (MC) of the input. This is because MRP represents the additional revenue generated by hiring one more unit of the input, while MC represents the additional cost of hiring one more unit of the input. At the point where MRP=MC, the firm is maximizing its profits by hiring the optimal amount of input.

Question 13

The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia, with only one employer, a logging company.
  FIGURE 14-4
-Refer to Figure 14-4. Suppose this labour market is in a monopsonistic equilibrium. Then, suppose the workers form a union and negotiate a higher wage with the firm. In this case the wage will be and the employment will be .

Accepted Answer

The answer of The diagram below shows the supply and...

Question 14

FIGURE 14-2
-Refer to Figure 14-2. In a perfectly competitive labour market, the equilibrium wage rate and the quantity of labour employed would be

Accepted Answer

The answer of  FIGURE 14-2
-Refer to Figure 14-2. In...

Question 15

FIGURE 14-2
-Refer to Figure 14-2. Suppose the labour market is in a monopsonistic equilibrium. If a minimum wage is then imposed at W5, the effect would be to

Accepted Answer

A minimum wage above the equilibrium wage will create a pool of unemployed workers.

Question 16

Suppose that a regional health authority is the only employer of nurses, and further, suppose that nurses are not unionized. The 625 currently employed nurses are paid $27 per hour. To attract an additional nurse, the employer must increase the wage to $28 per hour. The marginal cost of this additional worker is

Accepted Answer

The answer of Suppose that a regional health authority is...

Question 17

FIGURE 14-2
-Refer to Figure 14-2. If the labour market were in a monopsonistic equilibrium, the predicted wage and number of workers employed would be

Accepted Answer

The monopsonistic equilibrium is at the point where the marginal revenue product of labor (MRPL) curve intersects the labor supply curve. At this point, the wage rate is W4 and the number of workers employed is Q4.

Question 18

The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia, with only one employer, a logging company.
  FIGURE 14-4
-Refer to Figure 14-4. Compared to the outcome in a competitive labour market, the wage and employment outcome in this townʹs monopsonistic labour market are as follows:

Accepted Answer

The answer of The diagram below shows the supply and...

Question 19

If we compare the wage rate and the level of employment achieved in a competitive labour market with those in a monopsonistic labour market, the latter will generate

Accepted Answer

The answer of If we compare the wage rate and...

Question 20

FIGURE 14-2
-Refer to Figure 14-2. Suppose the labour market is perfectly competitive. If a minimum wage of W 5 were then established, the predicted effect would be which one of the following?

Accepted Answer

A minimum wage of W5 would have a negative effect on employment, as the wage rate would be higher than the equilibrium wage rate. As a result, firms would demand fewer workers (Q2Q4 instead of Q1Q2) and there would be excess supply of labour (Q3Q4 instead of Q2Q3), leading to unemployment equal to Q1Q4. Therefore, employment would fall by the amount Q1Q4.

Quiz 14: Labour Markets and Income Inequality

Consider a monopsonistic labour market. Ten units of labour will be supplied if the wage rate is $12, and 11 units of labour will be supplied if the wage rate is $14. The marginal cost of the eleventh worker is

Suppose we have a labour market with a monopsony employer in a town. Now suppose that all workers form a union and negotiate a wage with the employer. We refer to this as a situation of

Consider a monopsonistic labour market. One hundred units of labour will be supplied if the wage rate is $12, and 101 units of labour will be supplied if the wage rate is $14. The marginal cost of the 101st worker is

Consider a wage-setting union in an otherwise competitive labour market. If the union sets a wage above the competitive level, the effect will be

FIGURE 14-2 -Refer to Figure 14-2. Suppose the labour market is perfectly competitive. If a minimum wage of W4 is then established, the predicted change in the wage is

Suppose that the professional association of dentists reduces entry into their profession by lengthening the required training program. The likely effect is that

The diagram below shows the supply and demand for labour in a hypothetical town in northern British Columbia, with only one employer, a logging company. FIGURE 14-4 -Refer to Figure 14-4. The wage paid by this monopsonistic firm will be and employment will be )

FIGURE 14-2 -Refer to Figure 14-2. Suppose the labour market is initially in a monopsonistic equilibrium. If a strong union is then formed and establishes a minimum wage of W1,

Suppose your firm is a monopsonist hiring only one variable input. If you want to maximize profits, you will purchase that variable input up to the point where the

FIGURE 14-2 -Refer to Figure 14-2. In a perfectly competitive labour market, the equilibrium wage rate and the quantity of labour employed would be

FIGURE 14-2 -Refer to Figure 14-2. Suppose the labour market is in a monopsonistic equilibrium. If a minimum wage is then imposed at W5, the effect would be to

FIGURE 14-2 -Refer to Figure 14-2. If the labour market were in a monopsonistic equilibrium, the predicted wage and number of workers employed would be

If we compare the wage rate and the level of employment achieved in a competitive labour market with those in a monopsonistic labour market, the latter will generate

FIGURE 14-2 -Refer to Figure 14-2. Suppose the labour market is perfectly competitive. If a minimum wage of W 5 were then established, the predicted effect would be which one of the following?