Suppose that a monopsonist increases the number of workers hired from 10 to 11.If the market wage increases from $10 per worker to $11 per worker, the marginal factor cost for the eleventh worker is:

Question

Quizplus · Accepted Answer

When the monopsonist hires an additional worker, it must increase the wage it offers to all workers to attract the new worker. Therefore, the marginal factor cost (MFC) of the eleventh worker is the sum of the increase in wages for all 11 workers.

The increase in wages is $1 per worker, so the MFC for the eleventh worker is:

MFC = $10 + $11 + $11 + ... + $11
MFC = $10 + $11(10)
MFC = $10 + $110
MFC = $120

Therefore, the correct answer is B) $21.

Suppose That a Monopsonist Increases the Number of Workers Hired