Explain why a monopsonist's marginal factor cost curve must lie above its labor supply curve


The labor supply curve shows the wage rate to be paid in order to hire each additional unit of labor. For a monopsonist, when it offers higher wages to attract additional units of labor, it must also pay the higher wage to all other workers. Therefore, the change in total labor cost rises even faster than the average wage rate, and hence the MFC curve will lie above the labor supply curve.

Economics

You might also like to view...

Everything else held constant, a monetary expansion is characterized by ________ output and ________ interest rates

A) rising; rising B) rising; falling C) falling; rising D) falling; falling

Economics

A tax imposed on a good can:

A. discourage consumption of the good. B. encourage production of the good. C. increase the supply of complementary goods. D. prevent the market from reaching an efficient equilibrium.

Economics

A nation can determine how close it is to the classical range by considering its:

a. Export position. b. Net export position. c. Exchange rate. d. None of the above.

Economics

"Market power" refers to a firm's ability to:

A. influence the price its competitors charge. B. raise its price without losing all of its sales. C. undercut its competitors' prices. D. force consumers to buy high-priced products.

Economics