Suppose that monopsony behavior results from the increased monitoring costs at large firms.A higher minimum wage would ________ the marginal expense of hiring labor but only if the workers are ________ afraid of losing their jobs and thus need less supervision.
A) rise; more
B) raise; less
C) lower; more
D) lower; less

Question

Quizplus · Accepted Answer

A higher minimum wage would lower the marginal expense of hiring labor, as stated in the question. However, if workers are more afraid of losing their jobs and need more supervision, the monitoring costs for the firm would remain high despite the lower wage costs. Therefore, the marginal expense of hiring labor would only decrease if workers are less afraid of losing their jobs and need less supervision.

Suppose That Monopsony Behavior Results from the Increased Monitoring Costs