If a firm is operating in a monopsony market,which of the following statements is correct?

Question

Quizplus · Accepted Answer

A monopsony market is a situation where there is only one buyer of a particular good or service. In the case of a monopsony market for labor, the firm has more bargaining power over workers and thus faces an upward-sloping supply of labor curve. This means that the firm must pay higher wages to attract additional workers. Thus, option A is incorrect. Additionally, a monopsony firm would hire fewer workers than in a competitive market because it has to pay a higher wage to attract workers. Thus, option B is incorrect. The MPRL (marginal product of resource used in production) declines more slowly in the monopsony market than in the competitive market because the monopsony firm has to pay a higher wage to attract additional workers, which motivates it to use the current workforce more efficiently. Thus, option D is incorrect. The firm's demand for labor curve is downward-sloping in a competitive market and downward-sloping in a monopsony market because the firm has market power in both situations, but in a monopsony market, it has more bargaining power over workers, allowing it to pay lower wages than it would in a competitive market. Thus, option E is incorrect.

If a Firm Is Operating in a Monopsony Market,which of the Following