The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor

-A firm that was initially a monopsonist, but now has to buy from a competitive resource market will:
A)buy more amount of resources and pay a higher price for these resources.
B)buy the same amount of resources and pay a higher price for these resources.
C)buy less amount of resources and pay a lower price for these resources.
D)buy less amount of resources and pay a higher price for these resources.
E)buy more amount of resources and pay a lower price for these resources.

Question

The figure given below represents equilibrium in the labor market with the demand and supply curves of labor.Figure 14.6
In the figure,
D = MRP implies demand for labor = Marginal Revenue Product
MFC represents Marginal Factor Cost curve
S represents the supply curve of labor
 
-A firm that was initially a monopsonist, but now has to buy from a competitive resource market will:
A)buy more amount of resources and pay a higher price for these resources. 
B)buy the same amount of resources and pay a higher price for these resources. 
C)buy less amount of resources and pay a lower price for these resources. 
D)buy less amount of resources and pay a higher price for these resources. 
E)buy more amount of resources and pay a lower price for these resources.

Quizplus · Accepted Answer

When a firm transitions from being a monopsonist to buying from a competitive resource market, it will likely buy more resources due to the increased supply and competition among sellers, and it will pay a higher price because it no longer has the market power to set prices as it did when it was the sole buyer.

The Figure Given Below Represents Equilibrium in the Labor Market