150. When Harlan County, Kentucky, has a monopsony coal mining firm,
a.
d and e.
b.
workers will work for the firm that pays the higher wage.
c.
coal buyers will continue to buy coal from other counties.
d.
coal miners will only have one employer.
e.
wages will be determined only by the demand for labor.
151. The supply curve that monopsonists face is different from the supply curves that firms in competitive
labor markets face because with a monopsony,
a.
d and e.
b.
the supply curve of labor is relatively flat.
c.
offering a wage lower than the market wage means having no workers.
d.
the employer faces the market supply curve.
e.
the firm does not take the wage as given.
152. A monopsonist can pick the ____, while a monopolist can pick ____.
a.
the price it will charge; the wage it will pay
b.
the wage it will pay; the price it will charge
c.
the market price for its output; the quantity it will produce
d.
marginal product of labor; the marginal cost of labor
e.
number of competitors; the number of buyers
153. Suppose a monopsonist wants to hire more workers. If it has to pay the same wage to all of its
workers, the:
a.
marginal factor cost will fall while the wage will rise.
b.
wage will fall while the marginal factor cost will rise.
c.
difference between the wage and marginal factor cost will become smaller.
d.
difference between the wage and the labor supply curve will increase.
e.
wage and the marginal factor cost will increase.
154. Suppose a monopsonist currently employs 100 workers at a wage of $400 per week. If the firm wants
to expand employment to 110 workers, and the 110th worker will only work for $450 per week, what
is the approximate marginal factor cost of the 110th worker?
a.
$450 per week.
b.
$5,500 per week.
c.
$950 per week.
d.
$9,500 per week.
e.
$49,500 per week.
155. Schleppsi, a soft drink maker, is a monopsonist in the county where it manufactures all of the Diet
Schleppsi it produces. Suppose the current daily labor cost to the firm is $35,000 with 99 workers and
the total wage cost with 100 workers would be $36,000. What will the market wage be if Schleppsi
hires the 100th worker?
a.
$35.
b.
$36.
c.
$100.
d.
$350.
e.
$360.
156. Suppose a monopsonist hires its second worker and this hiring has a marginal factor cost of $75 per
day. If the market wage is now $62.50 per day, what was the first employee earning when she worked
alone?
a.
$40.
b.
$45.
c.
$50.
d.
$55.
e.
$60.
157. In a labor market with one employer, the MFC is:
a.
above the labor supply curve.
b.
above the labor demand curve.
c.
what determines the wage.
d.
downward sloping.
e.
perfectly horizontal.
158. Which of the following statements is true about monopsony?
a.
c and e.
b.
c, d, and e.
c.
Monopsonists exercise complete buying power.
d.
Monopsonists maximize profit by setting MRP = MFC.
e.
Monopsonists face the whole labor supply curve.
159. Economists define a labor market with only one buyer to be:
a.
a monopoly.
b.
an oligopoly.
c.
a monopsony.
d.
perfectly competitive.
e.
backward bending.
160. If a town has a monopsony, this means:
a.
there is only one employer.
b.
price discrimination takes place.
c.
goods are priced too high.
d.
no unions can exist.
e.
excess profits are being made
161. The labor supply curve facing a monopsonist is:
a.
downward sloping.
b.
upward sloping.
c.
a horizontal line.
d.
backward bending.
e.
a vertical line.
162. The monopsonist’s labor supply curve is the same as the:
a.
wage rate.
b.
marginal revenue product curve.
c.
marginal product curve.
d.
market labor demand curve.
e.
market labor supply curve.
163. For a monopsonist, the marginal factor cost is always:
a.
equal to the wage rate.
b.
less than the wage rate.
c.
greater than the wage rate
d.
the same as the labor supply.
e.
the same as the labor demand.
164. Lorna’s Lumberyard is a monopsony. Lorna estimates that at a wage of $10, 100 workers would be
willing to work for her. Similarly, at a wage of $12, 200 workers would be willing to work. Her
marginal factor cost is:
a.
$10.
b.
$14.
c.
$120.
d.
$140.
e.
$240.
165. If a monopsonist offers a wage of $6, he finds that 1,200 people are willing to work for him. This
means that the:
a.
marginal factor cost is $6.
b.
marginal factor cost is $200.
c.
total wage cost is $1,200.
d.
total wage cost is $7,200.
e.
$6 wage is too high.
166. The MFC curve increases for a monopsonist because:
a.
hiring more workers raises total labor costs.
b.
output price rises as a firm’s market power increases.
c.
hiring more workers does not affect wages.
d.
the later workers hired are less productive.
e.
as more workers are hired, all workers receive higher wages.
Exhibit 11-14 Labor cost data for a monopsonist
Wage Rate
Number of
Workers
$ 0
0
5
10
8
20
12
30
16
40
167. In Exhibit 11-14, when the monopsonist hires 30 workers, total wage cost is:
a.
$12.
b.
$30.
c.
$360.
d.
$480.
e.
$640.
168. In Exhibit 11-14, the marginal factor cost when the monopsonist goes from 30 to 40 workers hired is:
a.
$28.
b.
$4.
c.
$64.
d.
$36.
e.
$10.
169. In Exhibit 11-14, the additional labor cost per 10 workers hired when the monopsonist goes from 10 to
20 workers is:
a.
$50.
b.
$110.
c.
$160.
d.
$360.
e.
$480.
170. In Exhibit 11-14, the monopsonist will maximize profits by hiring how many workers?
a.
10.
b.
20.
c.
30.
d.
40.
e.
Unable to determine from the information given.
171. If the wage rate in a monopsonistic industry is $15, the marginal factor cost will be:
a.
$0.
b.
$1.
c.
$15.
d.
greater than $15.
e.
less than $15.
172. The monopsonistic employer hires more workers until marginal:
a.
physical product is zero.
b.
revenue product equals marginal factor cost.
c.
revenue product equals the wage.
d.
physical product equals the wage.
e.
physical product equals marginal factor cost
173. If a monopsony finds that its MRP is greater than its MFC, it:
a.
is doing the right thing to maximize profits.
b.
should hire fewer workers to increase profits.
c.
should hire more workers to increase profits.
d.
should pay the workers a lower wage.
e.
should produce less output.
174. In a monopsonistic labor market, workers are paid a wage:
a.
below their MRP.
b.
equal to the intersection of MRP and S.
c.
equal to the MFC.
d.
equal to the price of the output.
e.
above their MFC.
TRUE/FALSE
1. For a perfectly competitive firm, marginal revenue product is equal to price minus marginal revenue.
2. Marginal revenue product of labor measures the extra revenue generated to the firm from the
employment of an additional worker.
3. In a competitive labor market a firm will continue to employ workers for as long as an additional
worker’s marginal revenue product exceeds the wage rate.
4. In a competitive labor market, marginal revenue product equals marginal product times the wage rate.
5. In a competitive labor market, the demand for labor X that produces product Y will increase if the
demand for product Y increases.
6. In a competitive labor market a firm will continue to employ workers for as long as an additional
worker’s marginal revenue product is below the wage rate.
7. As the price of a competitive firm’s product rises, the firm’s demand for labor also rises.
8. If the MRP is less than the wage, the firm should hire more labor.
9. A decrease in the price of the output will decrease the firm’s demand for labor.
10. An increase in the demand for a product will shift the demand curve for labor producing the product to
the left.
11. An improvement in technology that increases the marginal product will shift the demand for labor
curve to the right.
12. An increase in the demand for a product will shift the demand curve for labor producing the product to
the right.
13. An improvement in technology that increases the marginal product will shift the demand for labor
curve to the left.
14. Union membership as a percentage of the civilian labor force is lower in the United States than in
Germany or Japan.
15. As a percentage of nonfarm workers, union membership in the United States grew most rapidly since
1945.
16. Monopsony means a labor market with a single buyer.
17. Marginal factor cost (MFC) is the same as the wage rate for a monopsonist.
18. If a monopsonist’s labor supply curve is positively sloped, the marginal factor cost (MFC) will exceed
the wage rate.
19. A monopsonist will hire fewer workers than will be hired in a competitive labor market.
20. To maximize profit, a monopsonist hires workers up to the point at which marginal factor cost (MFC)
equals marginal revenue product (MRP).
21. Monopsony means a product market with single buyer.
22. If a monopsonist’s labor supply curve is positively sloped, the marginal factor cost (MFC) will be
below the wage rate.
23. A monopsonist will hire more workers than will be hired in a competitive labor market.
24. A firm’s demand curve for labor coincides with the marginal factor cost of labor curve.
25. A monopsony is defined as a monopoly that has to negotiate with a labor union.
26. A monopsony hires labor up to the point where the marginal revenue product of labor equals the wage
rate.
ESSAY
1. Explain why wage rates might rise at Joe’s Quik-Print Shop if Joe replaces his aging copy machines
with state-of-the-art copy machines.
2. Explain how the presence of a superstar basketball player can increase the marginal revenue product of
the other players on the team.
3. Describe the decision for a perfectly competitive employer in determining the profit maximizing
quantity of labor to employ.
4. Describe the factors that could cause an increase in the wage rate of workers.
5. Describe the two basic strategies of unions in increasing wage rates for their members.
6. Explain why a monopsonist’s marginal factor cost curve must lie above its labor supply curve.
