If there is a monopoly in the capital market,whereas the labor market is competitive then:
A)the rental rate of capital will be greater than the wage rate.
B)the labor market will be in equilibrium,but there will be excess supply in the capital market.
C)the marginal rate of technical substitution must be greater than the input price ratio.
D)the capital market will be in equilibrium,but there will be excess demand in the labor market.

Question

Quizplus · Accepted Answer

In a monopoly in the capital market, the rental rate of capital will be determined based on the demand for capital and the level of monopoly power possessed by the monopolist. Since the labor market is competitive, the wage rate will be determined by the intersection of labor supply and demand. As a result, the rental rate of capital will be higher than the wage rate.

If There Is a Monopoly in the Capital Market,whereas the Labor