Which of the following is true for a monopsony?
A)It cannot buy additional units of a factor without increasing the price it pays for the factor.
B)It can buy additional units of a factor without increasing the price it pays for the factor.
C)The supply of labor it faces is the industry supply of labor.
D)a and c
E)b and c

Question

Quizplus · Accepted Answer

A monopsony faces a situation where it is the sole buyer of a factor of production, such as labor. Therefore, if it wants to buy more of that factor, it must increase the price, because it faces the upward-sloping supply curve for the factor (A). Additionally, the supply of labor it faces is indeed the industry supply because it is the only buyer in the market (C).

Which of the Following Is True for a Monopsony