Refer to the above graph.The producer illustrated:
A) is a monopsonist since MR = P for every unit sold.
B) is a pure competitor in the output market since it must pay the market wage.
C) is a monopsonist in its output market since it has control over the market wage rate.
D) hires labor in a competitive market since it must pay each worker W*,the market wage rate.

Question

Refer to the above graph.The producer illustrated:
A) is a monopsonist since MR = P for every unit sold. 
B) is a pure competitor in the output market since it must pay the market wage. 
C) is a monopsonist in its output market since it has control over the market wage rate. 
D) hires labor in a competitive market since it must pay each worker W*,the market wage rate.

Quizplus · Accepted Answer

The graph shows that the producer must pay the market wage rate, W*, for every unit of labor hired. This indicates that the producer is hiring labor in a competitive market, and does not have control over the wage rate. Therefore, Choice D is the correct answer. Choice A is incorrect because a monopsonist would have some control over the wage rate, but the graph shows that the producer pays the market wage rate. Choice B is incorrect because the producer is not a pure competitor in the output market - it has some control over the price it receives for its output. Choice C is also incorrect for the same reason - the producer does not have control over the market wage rate.

Refer to the Above Graph.The Producer Illustrated