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

-Which of the following statements is not true?
A)Assuming a perfectly competitive labor market, a firm selling in a monopolistic product market will have a lower marginal revenue product curve than a firm in a perfectly competitive product market.
B)The intersection of market-labor supply with market-labor demand establishes equilibrium in a perfectly competitive labor market.
C)In monopsonistic labor markets, an individual firm faces a positively sloped labor-supply curve.
D)In a perfectly competitive labor market, an individual firm can hire as many workers as it needs at the equilibrium wage rate
E)In a monopsonistic labor market, marginal revenue product is equal to the value of marginal product.

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
 
-Which of the following statements is not true?
A)Assuming a perfectly competitive labor market, a firm selling in a monopolistic product market will have a lower marginal revenue product curve than a firm in a perfectly competitive product market. 
B)The intersection of market-labor supply with market-labor demand establishes equilibrium in a perfectly competitive labor market. 
C)In monopsonistic labor markets, an individual firm faces a positively sloped labor-supply curve. 
D)In a perfectly competitive labor market, an individual firm can hire as many workers as it needs at the equilibrium wage rate 
E)In a monopsonistic labor market, marginal revenue product is equal to the value of marginal product.

Quizplus · Accepted Answer

In a monopsonistic labor market, the marginal cost of labor is higher than the wage rate due to the firm's market power and the increasing costs associated with hiring additional labor. Therefore, the marginal revenue product is not equal to the value of the marginal product, as the firm also considers the increasing marginal costs of hiring.

The Figure Given Below Represents Equilibrium in the Labor Market