What is a bilateral monopoly? What is the economic outcome from a bilateral monopoly? Is a bilateral monopoly a “bad” situation for society?
What will be an ideal response?
In a bilateral monopoly, a strong industrial union negotiates with a monopsony. In other words, a monopolistic “seller” of labor must negotiate with a monopolistic “buyer” of labor. The outcome from such negotiations is indeterminate in terms of the wage rate and quantity of labor hired. The monopsonistic employer will ask for a below-competitive-equilibrium wage rate. We do not know what will happen because economic theory cannot tell what is likely to occur at the collective bargaining table. The result is most likely to be determined by the relative strength of the bargaining power for one side or the other.
A bilateral monopoly may be socially desirable in some respects. In such a situation, the monopoly power on the buy side might cancel the monopoly power on the sell side, thus producing an outcome in terms of wage rates and levels of employment that is close to what it would be if there was a competitive market.
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If the demand for the Ford Mustang increases, we would expect Ford to
A) keep the price of Mustangs constant, regardless of the cost or benefit of a price change. B) increase the price of Mustangs to keep pace with the increase in demand. C) increase the price of Mustangs only if the benefit of a price increase outweighs the cost. D) decrease the price of Mustangs to maintain the increase in demand.
Total utility is determined by:
a. multiplying the quantity purchased of a good by the price of the good. b. finding the additional utility gained from consuming one more unit of a product. c. summing the marginal utilities for each successive units of a product consumed. d. summing the number of units of a good consumed. e. dividing the marginal utility derived from consuming a good by its price.
People who call for creating a "level playing field" believe that:
a. a country with relatively low wages is typically a country with an abundance of low-skilled labor. b. trading on the basis of comparative advantage benefits both domestic and foreign firms. c. creating a "level playing field" undermines the basis for specialization and economic efficiency. d. production in accordance with comparative advantage is unfair. e. free trade allocates the scarce resources in an efficient way.
Of the following, which determines the price a price searcher will be able to charge?
A) The costs of capital B) The costs of labor C) Advertising costs D) Demand E) A, B, and C above.