What is a monopsony and how does a monopsonistic firm determine the wage rate to pay its employees?
What will be an ideal response?
Monopsony is the situation when there is a single buyer of an input, such as labor, so that it alone faces the market input supply curve. For a monopsonist, hiring additional employees requires raising the wage rate for all workers, so its marginal factor cost curve lies above the labor supply curve. The monopsonist employs workers to the point at which marginal revenue product equals marginal factor cost and then pays the wage rate that those workers will accept for their labor services. As a consequence, the monopsonist's wage rate is lower than the marginal revenue product of labor.
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An average cost pricing rule for a natural monopoly sets the price ________ the marginal cost, thereby ________ a deadweight loss
A) below; avoiding B) below; creating C) above; avoiding D) above; creating
A legitimate objection to the government issuance of "indexed" bonds is that they
A) are more of a drain on the Treasury than conventional bonds. B) can encourage inflation and weaken policy resistance to it. C) discourage saving when inflation is reduced. D) further discourage the use of money and thus increase shoe-leather costs.
Regarding the privilege of incorporation (the right to organize an enterprise in the corporate form), all of the following are true except
(a) It gives a business firm limited liability, perpetual life and the rights of a citizen. (b) It is not provided for directly by the Constitution because, apart from state governments, the Constitution made no provisions for groups. (c) It is provided for at all levels of government—federal, state and local. (d) There is no "except"; all of the above are true.
If a demand curve is perfectly inelastic then:
(a) The elasticity coefficient is equal to infinity; (b) The demand curve for the good is vertical; (c) The elasticity coefficient is equal to zero; (d) Both (b) and (c) above are correct.