Question 1

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 answer of BigBiz, a local monopsonist, currently hires 50...

Question 2

The best number of workers for any employer to hire is that quantity in which:

Accepted Answer

The best quantity of workers for an employer to hire is at the point where the marginal revenue product (the additional revenue gained from one more worker) is equal to the marginal factor cost (the additional cost of employing one more worker). At this point, the employer is maximizing profits and any deviation from this point will result in a decrease in profits. Therefore, the best choice is A.

Question 3

Exhibit 11-9 A labor market 
-If the labor market shown in Exhibit 11-9 is a monopsony, the wage rate and number of workers employed will be determined at point: ​

Accepted Answer

The answer of Exhibit 11-9 A labor market 
-If the...

Question 4

Which of the following statements is true?

Accepted Answer

Marginal factor cost is the additional cost incurred by the firm when it hires an additional unit of a factor of production, while marginal revenue product is the additional revenue generated by the firm from producing one more unit of output. The demand curve for a perfectly competitive employer is downward sloping, not horizontal, at the market wage rate, and the supply curve of labor can be upward or downward sloping, depending on various factors such as the availability of substitutes and the size of the labor market. The law of diminishing marginal productivity can contribute to an upward sloping labor supply curve, but it is not the only factor.

Question 5

As compared to a firm that competes for labor, a monopsony will:

Accepted Answer

A monopsony is a situation where there is only one buyer of labor in the market. This means that the monopsony has more bargaining power over the wages of workers. In order to maximize profits, a monopsony will hire fewer workers and pay lower wages compared to a firm that competes for labor. Therefore, option A is the correct answer.

Question 6

Compared to a competitive input market, a monopsonist will hire:

Accepted Answer

A monopsonist, being the sole buyer in the market, has market power to set lower wages or prices for inputs and will hire fewer inputs compared to a competitive market where multiple buyers compete, leading to higher input prices and quantities.

Question 7

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

Accepted Answer

A monopsonist is a single buyer of a factor of production, so it has market power in the factor market. As the monopsonist hires more workers, it must offer a higher wage to attract them, which increases the factor price. This means that the monopsonist's marginal factor cost (MFC) curve lies above its supply curve, which represents the cost of each additional unit of the factor. Therefore, choice C is correct as the monopsonist has to increase the factor price to hire more.

Question 8

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

Accepted Answer

The answer of A monopsonist's marginal factor cost (MFC) curve...

Question 9

Given the same marginal revenue product (MRP) and supply curves, the equilibrium quantity of labor employed in a monopsonistic labor market will be:

Accepted Answer

In a monopsonistic labor market, the employer has market power to set the wage rate below the competitive level, leading to a lower quantity of labor employed than in a competitive labor market. Therefore, the equilibrium quantity of labor employed in a monopsonistic labor market will be less than that in a competitive labor market.

Question 10

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 11

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

The answer of Exhibit 11-8 A labor market 
-If the...

Question 12

A monopsonist hires the amount of labor where the marginal revenue product of labor equals the:

Accepted Answer

A monopsonist is a single buyer of labor, and so it faces an upward sloping supply curve of labor. To hire an additional worker, the monopsonist must increase the wage rate paid to all workers, which is its marginal factor cost of labor. The monopsonist will hire workers up to the point where the marginal revenue product of labor equals its marginal factor cost of labor.

Question 13

Which of the following type of firm is not a price taker in the market in which the firm buys its inputs?

Accepted Answer

A monopsony is a market structure where there is only one buyer for a particular product or service. This gives the monopsonist buyer some market power and the ability to influence the price of the goods they are purchasing from suppliers. Therefore, they are not a price taker in the market where they buy their inputs. In contrast, in perfect competition, oligopoly, and monopoly markets, firms are either price takers or have significant market power allowing them to set prices.

Question 14

A union may negotiate limits on workload in order to increase the demand for labor and raise workers' salaries. This practice is known as:

Accepted Answer

Featherbedding refers to the practice of negotiating limits on productivity or staffing levels that are higher than necessary, in order to create more jobs and increase demand for labor. This can lead to higher wages for workers, but can also lead to inefficiencies and higher costs for employers.

Question 15

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...

Question 16

Exhibit 11-9 A labor market 
-If the labor market shown in Exhibit 11-9 is competitive, the wage rate and number of workers employed will be determined at point: ​

Accepted Answer

The answer of Exhibit 11-9 A labor market 
-If the...

Question 17

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

A monopsony is a market structure in which only one buyer (in this case the company) exists for a particular product or service. As the sole buyer of labor, the monopsony has the power to dictate the wages it pays to its workers.

If hiring an additional worker would increase the company's revenue by $150 per day, this means that the contribution of that worker to the company's output is worth $150 per day. In a competitive market, wages would be determined by the intersection of supply and demand for labor, and workers would be paid their marginal product (the additional output they produce). However, in a monopsony, the employer has the power to set wages below the marginal product of labor.

Since the monopsony owner believes that hiring an additional worker would increase revenue by $150 per day, but has not actually hired this worker, it suggests that the additional cost of hiring the worker (i.e. the wage paid to the worker) is greater than the marginal product of the worker. Therefore, the monopsony pays its workers less than $150 per day, and the correct answer is C.

We cannot conclude that the monopsony pays its workers exactly $75 per day (answer D) because we do not have information about the marginal cost of labor.

Question 18

Which of the following statements is true?

Accepted Answer

The answer of Which of the following statements is true?
...

Question 19

A monopsony will:

Accepted Answer

A monopsony is a situation where there is only one buyer or employer in the market. In this case, the monopsonist has market power and can dictate the wages and the quantity of labor to employ. However, if a monopsonist wants to maximize profits, it must balance the benefits of hiring an additional worker (the marginal revenue product) with the costs of doing so (the marginal factor cost). Thus, a monopsony will employ a quantity of labor where the marginal revenue product equals the marginal factor cost, which is less than what a competitive employer would hire. Therefore, choice C is the correct answer. A and B are incorrect because a monopsony does not necessarily hire more workers or pay a higher wage than a competitive employer.

Question 20

A monopsony is a:

Accepted Answer

A monopsony is a market situation in which there is only one buyer of a good or service, giving them significant market power to influence the price and quantity of the product traded.

Quiz 11: Labor Markets

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?

The best number of workers for any employer to hire is that quantity in which:

Exhibit 11-9 A labor market -If the labor market shown in Exhibit 11-9 is a monopsony, the wage rate and number of workers employed will be determined at point: ​

Which of the following statements is true?

As compared to a firm that competes for labor, a monopsony will:

Compared to a competitive input market, a monopsonist will hire:

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

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

Given the same marginal revenue product (MRP) and supply curves, the equilibrium quantity of labor employed in a monopsonistic labor market will be:

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:

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 hires the amount of labor where the marginal revenue product of labor equals the:

Which of the following type of firm is not a price taker in the market in which the firm buys its inputs?

A union may negotiate limits on workload in order to increase the demand for labor and raise workers' salaries. This practice is known as:

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 11-9 A labor market -If the labor market shown in Exhibit 11-9 is competitive, the wage rate and number of workers employed will be determined at point: ​

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:

Which of the following statements is true?

A monopsony will:

A monopsony is a:

Exhibit 11-9 A labor market -If the labor market shown in Exhibit 11-9 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 11-8 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 11-9 A labor market -If the labor market shown in Exhibit 11-9 is competitive, the wage rate and number of workers employed will be determined at point: