Question 1

Using calculus,show the profit-maximizing employment of inputs for a perfectly competitive firm.

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Question 2

Assume that a car manufacturing plant in a small town in Michigan in the U.S.is a monopsonist employer of heavy machinery operators.The marginal value product of labor is given by w = 1100 - 20Q where w is the wage rate and Q is the number of heavy machinery operators.The supply of heavy machinery operators is given by w = 200 + 5Q.What is the profit-maximizing level of employment and wage for the car manufacturer? Assume that the plant is perfectly competitive in the output market.

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Question 3

A firm faces total costs,C,price of capital,r,and price of labor,w. ( A)With capital (K)on the y-axis and labor (L)on the x-axis,graph a firm's optimal combination of inputs for producing Q₀ units of output.

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Question 4

(
A)A backhoe,a piece of excavating equipment which is mounted on a tractor,acts as both a complement and as a substitute to labor.Explain how it could be used as a complement or a substitute to labor.

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A)A backhoe,a piece of excavating equipment which...

Question 5

The following figure shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market.
Figure 16-2 
-Refer to Figure 16-2.When the monopsonist is in equilibrium,the level of labor employed is _____.

Accepted Answer

The monopsonist will employ labor at the point where the marginal cost (MC) intersects with the demand (D) curve, which is point C. At this point, the monopsonist will hire Q units of labor at a wage rate of W, resulting in an average cost (AC) of AC1. At any other level of employment, the marginal cost of hiring an additional worker would either be higher than the marginal revenue product (resulting in a loss) or lower, which would mean the monopsonist could increase profits by hiring more workers. Therefore, the level of labor employed will be Q at point C on the MC and demand curves.

Question 6

A monopsony differs from a monopoly in that:

Accepted Answer

A monopoly has market power in the product market, allowing it to control prices and output. In contrast, a monopsony has market power in the input market, allowing it to control input prices and therefore influence production costs. Option A is incorrect as the market capitalization of a firm is not a defining characteristic of a monopoly or monopsony. Option B is also incorrect as the input price is typically lower in a monopsony due to the firm's ability to negotiate lower prices from suppliers. Option D is incorrect as a monopoly faces a downward-sloping demand curve for its product, while a monopsony faces an upward-sloping demand curve for inputs.

Question 7

Mines located in rural mountain towns in Kentucky and West Virginia are often the only employers in the area.In other words,a mining company in Kentucky would be considered:

Accepted Answer

A monopsonist is a single buyer in a market, and in this case, the mining company is the only significant employer in the area, giving it the power to dictate wages and working conditions. This is a common situation in rural mining communities where alternative job opportunities are limited or non-existent.

Question 8

Compared to a competitive labor market,in a monopsony labor market:

Accepted Answer

In a monopsony labor market, the single buyer (employer) has more power to set wages and employment levels. This typically results in both lower wages and lower levels of employment compared to a competitive labor market, where multiple employers are competing for workers, driving up both wages and employment levels.

Question 9

Define monopsony in an input market and graphically illustrate equilibrium employment and wages under a monopsony.

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Question 10

Which of the following correctly describes a monopsony?

Accepted Answer

A monopsony is a market structure in which there is only one buyer of a particular good or service. Therefore, a monopsony firm is the sole buyer in an input market. Choice A describes a monopoly, where there is only one seller of a particular good or service. Choice B describes a duopoly, where there are two firms that dominate the market. Choice D describes a cartel, where a group of firms collude to set prices.

Question 11

The following figure shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market.
Figure 16-2 
-Refer to Figure 16-2.When the monopsonist is in equilibrium,the wage rate paid to labor is _____.

Accepted Answer

In a monopsony, the equilibrium wage rate is determined where the marginal cost of labor (MCL) equals the marginal revenue product (MRP) of labor. The wage rate paid is typically lower than the competitive wage rate, which is represented by P1 in the figure.

Question 12

Suppose that a monopsonist is able to perfectly discriminate among workers and pay each her reservation wage.Graphically illustrate equilibrium employment and wages for a perfectly-discriminating monopsonist.How do they compare to a firm which hires labor in a perfectly competitive market? Assume the firm has no monopoly power and sells output in a competitive market.

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Question 13

A monopoly firm faces the output demand curve P = 25 - 0.5Q,where P is the price of the final product and Q is the level of output.The production function is given by Q = 5X,where X is the only input used in production.Each unit of X is bought by the firm at a constant price of $25 per unit.Based on this information,what level of input would the profit-maximizing monopoly employ?

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Question 14

Given the same demand and cost functions,which of the following is true of a monopsony input market as compared to a competitive input market?

Accepted Answer

In a monopsony market, there is only one buyer of inputs, allowing them to have market power and set a lower price for inputs. This results in a lower demand for inputs and lower employment of inputs relative to a competitive input market. Therefore, choice A is correct.

Question 15

The reserve clause in Major League Baseball (MLB),which allowed baseball players to negotiate salary only with the first team that signed them,was removed in 1975.The dismantling of the reserve clause was undertaken to:

Accepted Answer

The reserve clause allowed MLB owners to hold a monopsony power over players, meaning they were the only buyers of players' services. Removing the reserve clause broke up this monopsony power and allowed players to negotiate with multiple teams and potentially earn higher salaries.

Question 16

Using a graph,show the welfare effects of a monopsony input market compared to a perfectly competitive input market.Assume upward sloping cost curves.

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Question 17

Explain the shapes of the supply curve of labor for all industries together and the labor supply curve for a particular industry.

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Question 18

For a firm that is perfectly competitive in the output market but a monopsonist in a particular input market:

Accepted Answer

In a monopsony, the firm has market power in hiring labor, meaning it can influence the wage rate. As a result, the wage rate paid to workers is less than the marginal cost of labor because the firm faces an upward-sloping labor supply curve. This means that to hire additional workers, the firm must pay a higher wage not only to the additional workers but also to all the previously hired workers, making the marginal cost of labor higher than the wage rate of any individual worker.

Question 19

Using calculus,show the profit-maximizing employment of inputs for an output market monopoly.

Accepted Answer

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Quiz 16: Employment and Pricing of Inputs

Using calculus,show the profit-maximizing employment of inputs for a perfectly competitive firm.

A firm faces total costs,C,price of capital,r,and price of labor,w. ( A)With capital (K)on the y-axis and labor (L)on the x-axis,graph a firm's optimal combination of inputs for producing Q₀ units of output.

( A)A backhoe,a piece of excavating equipment which is mounted on a tractor,acts as both a complement and as a substitute to labor.Explain how it could be used as a complement or a substitute to labor.

The following figure shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. Figure 16-2 -Refer to Figure 16-2.When the monopsonist is in equilibrium,the level of labor employed is _____.

A monopsony differs from a monopoly in that:

Mines located in rural mountain towns in Kentucky and West Virginia are often the only employers in the area.In other words,a mining company in Kentucky would be considered:

Compared to a competitive labor market,in a monopsony labor market:

Define monopsony in an input market and graphically illustrate equilibrium employment and wages under a monopsony.

Which of the following correctly describes a monopsony?

The following figure shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. Figure 16-2 -Refer to Figure 16-2.When the monopsonist is in equilibrium,the wage rate paid to labor is _____.

Given the same demand and cost functions,which of the following is true of a monopsony input market as compared to a competitive input market?

The reserve clause in Major League Baseball (MLB) ,which allowed baseball players to negotiate salary only with the first team that signed them,was removed in 1975.The dismantling of the reserve clause was undertaken to:

Using a graph,show the welfare effects of a monopsony input market compared to a perfectly competitive input market.Assume upward sloping cost curves.

Explain the shapes of the supply curve of labor for all industries together and the labor supply curve for a particular industry.

For a firm that is perfectly competitive in the output market but a monopsonist in a particular input market:

Using calculus,show the profit-maximizing employment of inputs for an output market monopoly.

Quiz 16: Employment and Pricing of Inputs

Using calculus,show the profit-maximizing employment of inputs for a perfectly competitive firm.

A firm faces total costs,C,price of capital,r,and price of labor,w. ( A)With capital (K)on the y-axis and labor (L)on the x-axis,graph a firm's optimal combination of inputs for producing Q0 units of output.

( A)A backhoe,a piece of excavating equipment which is mounted on a tractor,acts as both a complement and as a substitute to labor.Explain how it could be used as a complement or a substitute to labor.

The following figure shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. Figure 16-2 -Refer to Figure 16-2.When the monopsonist is in equilibrium,the level of labor employed is _____.

A monopsony differs from a monopoly in that:

Mines located in rural mountain towns in Kentucky and West Virginia are often the only employers in the area.In other words,a mining company in Kentucky would be considered:

Compared to a competitive labor market,in a monopsony labor market:

Define monopsony in an input market and graphically illustrate equilibrium employment and wages under a monopsony.

Which of the following correctly describes a monopsony?

The following figure shows the marginal cost [MC],average cost [AC],and demand [D] curves for a monopsonist in the labor market. Figure 16-2 -Refer to Figure 16-2.When the monopsonist is in equilibrium,the wage rate paid to labor is _____.

Given the same demand and cost functions,which of the following is true of a monopsony input market as compared to a competitive input market?

The reserve clause in Major League Baseball (MLB) ,which allowed baseball players to negotiate salary only with the first team that signed them,was removed in 1975.The dismantling of the reserve clause was undertaken to:

Using a graph,show the welfare effects of a monopsony input market compared to a perfectly competitive input market.Assume upward sloping cost curves.

Explain the shapes of the supply curve of labor for all industries together and the labor supply curve for a particular industry.

For a firm that is perfectly competitive in the output market but a monopsonist in a particular input market:

Using calculus,show the profit-maximizing employment of inputs for an output market monopoly.

A firm faces total costs,C,price of capital,r,and price of labor,w. ( A)With capital (K)on the y-axis and labor (L)on the x-axis,graph a firm's optimal combination of inputs for producing Q₀ units of output.