If a firm is a monopsony, then it
A)can pay any price it wants for the factors that it hires.
B)will have to pay the same price to each factor owner that supplies its factor.
C)will have to pay a higher price to purchase additional units of a factor.
D)need not lower the price of its product to induce buyers to purchase additional quantities.

Question

Quizplus · Accepted Answer

In a monopsony, where a single buyer (in this case, the firm) dominates the market for a particular factor of production, the firm faces an upward-sloping supply curve. This means that to entice more units of the factor (e.g., labor) to be supplied, the firm must offer a higher price for each additional unit.

If a Firm Is a Monopsony, Then It