What is the effect of a minimum wage law in a monopsony labor market?
What will be an ideal response?
A minimum wage rate can increase employment in a monopsony market. Over a range of employment, a minimum wage can lower the cost of hiring additional workers for a monopsony. In the absence of the minimum wage, the marginal cost of labor, MCL, curve exceeds the wage rate because hiring another worker requires that the firm must boost the pay of all its workers. With a minimum wage, hiring another worker at this wage rate requires that the firm pay this worker the minimum wage but the firm does not raise the wage rate paid its others workers because they, too, are paid the minimum wage. As a result, in this range of employment, a monopsony's cost of hiring another worker is lower with a minimum wage. The lower cost of hiring workers leads the monopsony to increase its employment.
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A short-run total cost function, TC = 100 + 32Q - 4Q2 + 0.4Q3, indicates the existence of
A) a linear total cost curve. B) a constant average variable cost curve. C) a U-shaped average variable cost curve. D) a constant marginal cost curve.
Suppose the supply of land is infinitely inelastic and the demand for land is downward sloping but inelastic at the current equilibrium. If the supply curve shifts rightward (e.g
, previously unusable land is cleared for production), what happens to the aggregate economic rents in this market? A) Decrease B) Increase C) Remain the same D) We do not have enough information to answer this question.
Which of the following is likely to dampen economic fluctuations in a country?
a. A regressive income tax b. An increase in tax rates c. A decrease in tax rates d. An increase in money supply e. Unemployment insurance
The price elasticity of demand is
A. always negative, but by convention, economists typically express the price elasticity of demand as an absolute value. B. always equal to zero, so there is no reason to consider the absolute value of the price elasticity of demand. C. always equal to -1, which by convention economists typically express as an absolute value, or 1. D. always positive, so there is no reason to consider the absolute value of the price elasticity of demand.