Explain how monopsony might affect the market for labor.
What will be an ideal response?
Monopsony leads to a smaller number of workers being hired and to lower wages.
Monopsony exists when only one employer is bidding for the services of many laborers;
that is, the labor market is not competitive. As the only demander, the employer in a
monopsony has the power to affect the wage level because workers do not have other
options if they want to work. Therefore, unemployed workers might be willing to accept
a wage lower than the prevailing wage if they are not able to move to an area with a
competitive labor market. The company moves down the positively sloped labor supply
curve, lowering the wages and increasing profits. When workers are paid less than their
marginal revenue product, they are in a sense being exploited.
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A. benefits-received B. inexpensive-to-collect C. ability-to-pay D. fairness of contribution
Refer to the information provided in Figure 6.3 below to answer the question(s) that follow.
Figure 6.3Refer to Figure 6.3. Molly's budget constraint is AB. It would swivel to AD if the price of
A. CDs increased. B. DVDs decreased. C. CDs decreased. D. DVDs increased.
If the banking system has a required reserve ratio of 25 percent, the money multiplier is
A. 0.25. B. 1.25. C. 0.2. D. 4.0.
The use of government spending and taxation for the purpose of stabilizing the economy is called __________.
Fill in the blank(s) with the appropriate word(s).