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Chapter 29 Unions and Labor Market Monopoly Power 983
22) A firm that is a monopolist in the output market and a monopsonist in the input market
A) will hire the same amount of labor as if perfect competition prevailed in both markets, but
pay a lower wage.
B) will restrict the level of output but not that of employment compared to the perfectly
competitive case.
C) will hire less labor but pay the same wage compared to the perfectly competitive case.
D) will hire less labor and pay a lower wage compared to the perfectly competitive case.
23) Bilateral monopoly exists when
A) a single buyer confronts a single seller.
B) there are two monopolistic buyers trying to buy resources.
C) two labor unions are trying to represent the same group of workers.
D) a firm is both a monopoly in its output market and a monopsonist in its input market.
24) A monopsonist is
A) a firm with monopoly power in the local area.
B) a firm that has a unionized labor force.
C) a single seller of an input.
D) a single buyer of an input.
25) When there is only one buyer in the market,
A) a closed shop exists.
B) a monopsony exists.
C) then the market will be perfectly competitive.
D) the supply curve for the good will be perfectly elastic.
26) The supply curve of labor to a monopsonist is
A) upward sloping.
B) downward sloping because of the law of diminishing marginal returns.
C) downward sloping, but not because of the law of diminishing marginal returns.
D) horizontal.
27) A monopsonist that wants to hire more labor must pay more for the new labor than it is
currently paying and increase the wage rate of all existing employees because
A) the demand curve for labor is inelastic. B) of labor unions.
C) the supply of labor is upward sloping. D) of competition in the labor market.
28) A monopsonist wants to purchase more labor. Which of the following statements is true?
A) The wage rate that the monopsonist has to pay future workers is lower than it pays current
workers since there is no other place to work.
B) The wage rate that the monopsonist has to pay future workers will be the same rate it pays
current workers.
C) The wage rate that the monopsonist has to pay future workers is higher than what it will
continue to pay current workers.
D) The monopsonist will have to raise the wage rate for current and additional employees.
29) For a monopsonist, the marginal factor cost curve will be above the supply of labor curve. The
marginal factor cost curve is above the supply curve because
A) the monopsonist will take advantage of labor and offer them lower wages.
B) in order for the monopsonist to sell an additional unit of the good, the price of the good
must be lowered.
C) in order for the monopsonist to hire more labor the monopsonist must also purchase more
capital.
D) the monopsonist will have to pay all workers a higher wage rate than the current wage
rate if it wants to hire more workers.
Chapter 29 Unions and Labor Market Monopoly Power 985
Quantity of Labor Required Hourly
Supplied to Management Wage Rate
0
1 $17
2 $19
3 $21
30) Refer to the above table. What is the marginal factor cost when the firm employs the second unit
of labor?
A) $19 B) $21 C) $36 D) $38
31) Refer to the above table. What is the marginal factor cost when the firm employs the third unit
of labor?
A) $62 B) $57 C) $25 D) $21
32) Refer to the above table. If the marginal revenue product is $21, how many workers will the
profit maximizing monopsonist hire and what wage will they pay each worker?
A) 1; $17 B) 2; $19 C) 2; $21 D) 3; $21
33) The marginal factor cost of a monopsonist is
A) upward sloping and the same as the supply curve.
B) downward sloping when the supply curve of labor is upward sloping.
C) upward sloping and rises faster than the supply curve.
D) horizontal.
34) For a monopsonist the marginal cost of increasing its workforce will always be greater than the
wage rate because
A) there is not good factor substitution in a monopsony.
B) the wage rate offered the newest employee must be paid to all workers.
C) the industry will be a closed shop.
D) a normal rate of return must be paid to the owner.
35) The main difference between a monopsonist and a competitive buyer of labor is that
A) the monopsonist can hire as many workers as it wants at the going wage while the
competitive firm must raise wages to hire additional workers.
B) the competitive firm can hire as many workers as it wants at the going wage while the
monopsonist can hire more workers at lower wages.
C) the competitor can hire as many workers as it wants at the going wage while the
monopsonist must raise wages to hire additional workers.
D) the monopsonist can force wages down and still hire as many workers as it wants while
the competitive firm must increase the wage rate to hire additional workers.
36) A monopsonist is currently employing 50 workers at $10 an hour. It wants to hire an additional
worker, but will have to pay the worker $10.10. The marginal factor cost is
A) ten cents. B) $10.00. C) $10.10. D) $15.10.
37) Under monopsony, marginal factor cost is
A) equal to the wage rate.
B)
b
elow the wage rate but increases as more workers are hired.
C) greater than the wage rate.
D) downward sloping.
38) Refer to the above figure. Under monopsony, the wage rate will be
A) W1. B) W2. C) W3. D) W5.
39) Refer to the above figure. The wage rate under perfect competition is
A) W2. B) W3. C) W4. D) W5.
40) Refer to the above figure. The monopsonistic exploitation is
A) W2W5. B) W1W5. C) W2W4. D) W2W3.
41) Monopsonistic exploitation is
A) measured by the area above the supply curve but below the wage paid.
B) the difference between the marginal revenue product of a worker and the wage received
by the worker.
C) measured by the height of the supply curve of labor.
D) the cost to society from unions.
42) What is it called when the price paid for a variable input is less than its marginal revenue
product?
A) Bilateral monopoly B) Monopsonistic exploitation
C) Monopolistic exploitation D) Featherbedding
43) Bilateral monopoly exists when
A) there is either a monopoly or a monopsony in the market.
B) there are two competing labor unions in a labor market.
C) there is a monopoly and a monopsony in a market.
D) a firm is both a monopolist in its output market and a monopsonist in the input market.
44) Which of the following is FALSE regarding a monopsonist?
A) The monopsonist is the only buyer in a market.
B) The monopsonist faces an upward sloping labor supply curve.
C) The monopsonist faces an upward sloping labor demand curve.
D) The monopsonist faces the entire market labor supply curve.
45) Since the National Basketball Association is the only significant employer of professional
basketball players, it might be referred to as a(n)
A) oligopsony. B) monopoly. C) monopsony. D) oligopolist.
46) When there is only one buyer in a market, there is a
A)
b
uyer s monopoly. B) monopoly.
C) monopsony. D)
b
uyer s cooperative.
47) When there is only one buyer of labor in a community, we talk of a
A) monopoly. B) monopsony.
C) monopolistic market. D) labor cooperative.
48) A company town in the lumber or mining industry is an example of a
A) monopoly. B)
b
ilateral monopoly.
C)
b
uyer s monopoly. D) monopsony.
49) A profit maximizing monopsonist will hire workers up to the point at which
A) W MRP. B) MRP MFC.
C) W MFC. D) W MRP MFC.
50) At the profit maximizing level of employment, the monopsonist
A) pays a wage equal to MRP. B) pays a wage greater than MRP.
C) pays a wage less than MRP. D) pays a wage equal to MFC.
51) In a monopsonistic market,
A) employment is lower but wages are higher than in a comparable competitive market.
B) employment is higher but wages are lower than in a comparable competitive market.
C)
b
oth employment and wages are higher than in a comparable competitive market.
D)
b
oth employment and wages are lower than in a comparable competitive market.
52) The figure supports all of the following statements regarding the marginal factor cost curve for a
monopsonist EXCEPT
A) the monopsonist firm looks at a marginal cost curve, MFC, which slopes upward and is
above its labor supply curve.
B) the marginal benefit of hiring additional workers is given by the firm s MRP curve.
C) the intersection of MFC with MRP, at point E, determines the number of workers hired.
D) a monopsonist cannot find the profit maximizing quantity of labor demanded at E.
53) In order to hire additional laborers, a monopsony must
A) lower the supply of labor. B) raise the wage rate.
C) advertise for the labor. D) do nothing.
54) A monopsonistic employer faces a
A) perfectly elastic labor supply curve.
B) perfectly inelastic labor supply curve.
C) MFC curve that is greater than the wage rate at each quantity of labor.
D) MFC curve that is less than the wage rate at each quantity of labor.
55) Paying a wage to an employee that is lower than the employee s marginal revenue product is
sometimes referred to as
A) illegal in most states. B) monopolistic exploitation.
C) monopsonistic exploitation. D) total exploitation.
56) Monopsonistic exploitation refers to
A) the payment to the resource equal to MFC.
B) the payment to a resource less than MRP.
C) the payment to a resource equal to MRP.
D) the payment to a resource above MRP.
57) When workers are paid a wage that is less than their contribution to a monopsonist s revenues,
A) this is sometimes referred to monopsonistic exploitation.
B) this is sometimes referred to as an incentive.
C) they seek part time employment.
D) they file a grievance with their union representative.
58) If a single supplier of labor, such as a union, were supplying labor to a single monopsonistic
employer, this is referred to as a(n)
A)
b
ilateral monopoly. B) trilateral monopoly.
C) total monopsony. D) collective monopoly.
59) Which of the following is FALSE regarding bilateral monopoly?
A) Bilateral monopoly is a market structure consisting of a monopolist and a monopsonist.
B) Bilateral monopoly is defined as a market structure in which a single buyer faces a single
seller.
C) An example of bilateral monopoly is a state education employer facing a single teachers
union in the labor market.
D) The price outcome is easily determined.
60) A bilateral monopoly means
A) that a monopsonistic employer bargains with two unions.
B) that a monopsonistic employer bargains with both an industrial and a craft union.
C) that a monopsonistic employer bargains with a monopoly.
D) that an industrial union bargains with a two firm oligopoly.
61) A bilateral monopoly exists when there is a
A) single buyer and many sellers in the market.
B) single seller and many buyers in the market.
C) large number of buyers and sellers in the market.
D) single buyer and a single seller in the market.
62) The MFC can be calculated by the
A) change in total wages/change in labor. B) total wages/total labor.
C) change in labor/change in total wages. D) total wages/change in labor.
63) The labor market in professional baseball is an example of
A) a bilateral monopoly. B) a monopsonistic labor market.
C) a monopolistic labor market. D) a perfectly competitive labor market.
64) The MFC curve
A) lies below the labor supply curve, when the labor supply curve is upward sloping.
B) lies above the labor supply curve, when the labor supply curve is upward sloping.
C) is the labor supply curve.
D) is parallel to the labor supply curve, when the labor supply curve is downward sloping.
65) In a bilateral monopoly, the wage rate that is determined in the market
A) is equal to MFC.
B) is equal to MRP.
C) is indeterminate.
D) is the same as in a perfectly competitive market.
Quantity Hourly Total Marginal
of Labor Wage Rate Wage Bill Factor Cost
0
1 $10
2 12
3 14
4 16
5 18
6 20
66) In the above table, what is the marginal factor cost of the 4th worker?
A) $16 B) $30 C) $64 D) $22
67) In the above table, what is the marginal factor cost of the 2nd worker?
A) $24 B) $14 C) $64 D) $12
68) In the above table, what is the marginal factor cost of the 5th worker?
A) $22 B) $18 C) $90 D) $26
69) In the above table, what is the marginal factor cost of the 6th worker?
A) $30 B) $18 C) $120 D) $20
70) In the above table, if the marginal revenue product is $18, how many workers will the profit
maximizing monopsonist hire?
A) 2 B) 3 C) 4 D) 5
71) In the above table, if the marginal revenue product is $14, how many workers will the profit
maximizing monopsonist hire?
A) 2 B) 3 C) 4 D) 5
72) In the above table, if the marginal revenue product is $18, how many workers will the profit
maximizing monopsonist hire and what wage will they pay each worker?
A) 5; $18 B) 3; $14 C) 3; $18 D) 4; $16
73) In the above table, if the marginal revenue product is $22, how many workers will the profit
maximizing monopsonist hire and what wage will they pay each worker?
A) 5; $18 B) 3; $14 C) 4; $22 D) 4; $16
74) In the above table, if the marginal revenue product is $16, how many workers will the profit
maximizing monopsonist hire and what wage will they pay each worker?
A) 5; $18 B) 5; $16 C) 4; $16 D) 6; $30
75) At any quantity, the marginal factor cost is always
A) parallel to the marginal revenue product.
B)
b
elow the labor supply curve.
C) above the labor supply curve.
D) above the labor demand curve.
76) A firm that is a monopsonist in the labor market and a monopolist in the product market will
hire labor to the point at which
A) MFC MRPm.
B) a perfectly elastic labor supply MRP.
C) a perfectly inelastic labor supply perfectly inelastic labor demand.
D) where supply of labor demand for labor.
77) In the above figure, what is the wage rate the monopsonist will pay?
A) W1B) W2C) W3D) W4
78) In the above figure, what is the wage rate for the perfectly competitive market?
A) W1B) W2C) W3D) W4
79) In the above figure, what is the quantity of workers that would be hired by a monopsonist?
A) Q1B) Q2C) Q3D) Q4
80) In the above figure, what is the quantity of workers that would be hired in a perfectly
competitive market?
A) Q1B) Q2C) Q3D) Q4
81) Which of the following is the BEST example of a monopsonist?
A) a household hiring a gardener
B) a turnip farmer hiring seasonal help
C) Hershey s Chocolate Factory in Hershey, PA
D) Vinaka Coffee Shop in Carlsbad, CA
82) A monopsonistic employer will pay a wage rate
A) less than the labor s MRP. B) greater than the labor s MRP.
C) equal to the labor s MRP. D) equal to MFC.
Quantity of
Wage Rate Labor Supplied
$10 1
$15 2
$20 3
$25 4
83) Use the above table. The MFC of the 3rd worker is
A) $5. B) $30. C) $20. D) $6.7.
84) Use the above table. The MFC of the 4th worker is
A) $5. B) $6.25. C) $25. D) $40.
85) Use the above table. If the marginal revenue product is $10, how many workers will the profit
maximizing monopsonist hire?
A) 1 B) 2 C) 3 D) 4
86) Use the above table. If the marginal revenue product is $20, how many workers will the profit
maximizing monopsonist hire?
A) 1 B) 2 C) 3 D) 4
87) Use the above table. If the marginal revenue product is $30, how many workers will the profit
maximizing monopsonist hire and what wage will they pay each worker?
A) 1; $10 B) 2; $15 C) 3; $20 D) 4; $25
88) Use the above table. The data shows that the firm
A) is hiring in a perfectly competitive labor market.
B) is selling its output in a perfectly competitive market.
C) is a monopsonist.
D) is selling its output in an imperfectly competitive market.
89) If a minimum wage is established, a monopsonist faces
A) an upward sloping supply of labor at all quantities of labor.
B) a downward sloping supply of labor at all quantities of labor.
C) a horizontal supply of labor at the minimum wage and the upward sloping portion of the
labor supply curve above minimum wage.
D) a horizontal supply of labor at the minimum wage and the downward sloping portion of
the labor demand curve below minimum wage.
90) What is a monopsony and how does a monopsonistic firm determine the wage rate to pay its
employees?
91) Using a graph, compare the labor market equilibrium under perfect competition and
monopsony. Explain.
