Suppose a monopsonist finds that the market price of its output has doubled, and to increase production to the new profit-maximizing level it has to double the wage to get more workers. How much, if any, does the return to monopsony power change?
a. It increases by the number of new workers needed.
b. It increases by the difference between the new wage and the old wage, multiplied by the number
of workers.
c. It decreases by the difference between the new wage and the old wage, multiplied by the number of workers.
d. It increases, but we cannot say by how much.
e. It doubles.
D
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Profits
A) are a cost of doing business because they are payments to others. B) are not a cost of doing business because they are owed to resource owners. C) are not a cost of doing business because they are often zero or negative. D) are a cost of doing business because entrepreneurs would not incur the risk of starting a business if they didn't expect to earn profits.
The group responsible for deciding on monetary policy is the
A) Federal Advisory Council. B) Board of Governors only. C) Federal Open Market Committee. D) group of 12 Federal Reserve Bank presidents only.
Suppose the price elasticity of demand for oil is 0.1. In order to lower the price of oil by 20 percent, the quantity of oil supplied must be increased by
A) 200 percent. B) 20 percent. C) 2 percent. D) 0.2 percent.
Refer to the above figures. A negative externality exists that has not been corrected. Price and quantity will be
A) P1 and Q1. B) P2 and Q2. C) P3 and Q3. D) P4 and Q4.