37 terms

# monopsony and imperfect comp

###### PLAY
The labor supply curve facing a purely competitive employer is __________ whereas the labor supply
curve facing a monopsonist is ___________.
A) upward sloping; horizontal C) vertical; upward sloping
B) downward sloping; vertical D) horizontal; upward sloping
d
In a monopsonistic labor market the employer will maximize profits by employing workers up to that point
at which:
A) the difference between the wage rate and marginal resource (labor) cost is at a maximum.
B) marginal revenue product equals marginal resource (labor) cost.
C) the wage rate equals marginal revenue product.
D) the wage rate equals marginal resource (labor) cost
b
A firm can hire six workers at a wage rate of \$8 per hour but must pay \$9 per hour to all of its employees to
attract a seventh worker. The marginal wage cost of the seventh worker is:
A) \$9. B) \$10. C) \$15. D) \$21.
c
Suppose the MRP of a firm's twelfth worker is \$22 and the worker's marginal wage cost is \$16. We can say
with certainty that the firm:
A) is hiring labor in a competitive labor market at a wage rate of \$16.
B) is hiring labor in a monopsonistic labor market.
C) will find it profitable to hire fewer workers.
D) will find it profitable to hire more workers.
d
In monopsony:
A) each firm employs a small portion of the total supply of labor.
B) the work force is highly mobile.
C) the wage rate paid by the employer varies directly with the number of workers employed.
D) the employer is a "wage taker."
c
If a firm faces an upsloping labor supply curve (and there is no union or minimum wage), its:
A) MRC curve is also upsloping. C) MRP curve is perfectly inelastic.
B) MRC curve is perfectly elastic. D) MRP curve is also uploping.
a
A monopsonist's wage cost in hiring an additional worker is the:
A) worker's wage rate.
B) worker's wage rate plus the wage increases paid to all workers already employed.
C) worker's wage rate adjusted for the lower price that must be charged for the extra output.
D) marginal wage cost less the wage rate.
b
A large hospital in a relatively small city finds that, if its demand for nurses increases, the wages of nurses
will rise. We can say that the hospital:
A) is a monopsonist.
B) faces a perfectly elastic supply of nurses.
C) is functioning in a perfectly competitive labor market.
D) will confront a surplus of nurses.
a
A monopsonist:
A) boosts the wage rate above the competitive level to attract more workers.
B) reduces the number of workers it employs so that it can pay each worker a lower wage rate.
C) is a "wage taker."
D) pays a wage rate equal to MRP.
b
A monopsonistic employer:
A) has a perfectly elastic labor supply curve.
B) is necessarily a monopolist in the product market.
C) confronts a marginal resource (labor) cost that is greater than the wage rate.
D) confronts a marginal resource (labor) cost that is less than the wage rate.
c
Other things equal, the monopsonistic employer will pay a:
A) lower wage rate and hire fewer workers than will a purely competitive employer.
B) higher wage rate but hire fewer workers than will a purely competitive employer.
C) lower wage rate but hire a larger number of workers than will a purely competitive employer.
D) higher wage rate and hire a larger number of workers than will a purely competitive employer
a
As compared to a purely competitive labor market, in a nonunionized monopsonistic labor market wages:
A) and employment will both be lower. C) will be lower, but employment will be higher.
B) will be higher, but employment will be lower. D) and employment will both be higher.
a
A monopsonist pays a wage rate that is:
A) less than the MRP of labor.
B) equal to the firm's marginal resource (labor) cost.
C) equal to the MRP of labor.
D) greater than the MRP of labor.
a
Which of the following is not correct?
A) Other things equal, a monopsonist will pay a lower wage rate than will a firm hiring labor
competitively.
B) A monopsonistic employer will pay workers a wage rate equal to their MRP.
C) A purely competitive seller will pay workers a wage rate equal to their MRP.
D) An imperfectly competitive seller will pay workers a wage rate equal to their MRP.
b
A monopsonistic employer's marginal resource (labor) cost curve:
A) is always more elastic than the labor supply curve.
B) coincides with the labor supply curve.
C) lies below the labor supply curve because the higher wage paid to an additional worker must also be
paid to all other employed workers.
D) lies above the labor supply curve because the higher wage paid to an additional worker must also be
paid to all other employed workers.
d
The critical feature of a monopsonistic labor market is that the employer:
A) has a perfectly elastic demand curve for labor.
B) can hire any number of workers it chooses at the going wage rate.
C) faces an upsloping labor supply curve.
D) faces a perfectly inelastic labor supply curve.
c
If a firm is a monopsonist in the hire of both labor and capital, it will obtain the profit-maximizing
quantities of labor and capital when:
A) MRPL/PL = MRPC/PC = 1. C) the MRP of labor equals the MRP of capital.
B) MRPL/MRCL = MRPC/MRCC = 1. D) the MRC of labor equals the MRC of capital.
b
If a firm is hiring variable resources D and F in imperfectly competitive input markets, it will maximize
profits by employing D and F in such quantifies that:
A) MRPD / MRCD = MRPF / MRCF = 1. C) MRPD / PD = MRPF / PF = 1.
B) MRPD / MRCD = MRPF / MRCF . D) MRPD / PD = MRPF / PF .
a
If an employer is a monopsonist:
A) its MRC curve will lie below its labor demand curve.
B) its labor supply and MRC curves will coincide and be perfectly elastic.
C) it must also be a monopolist in the product market.
D) its labor supply curve will be upsloping and the MRC curve will lie above it.
d
A union may increase the demand for the services of its constituents by all of the tactics below except:
A) successfully increasing labor productivity.
B) lobbying for increases in public expenditures on the product it is producing.
C) successfully advertising the product it is producing to private consumers.
D) increasing the price of products that are complements for the one it is producing.
d
Which of the following unions best represents the exclusive unionism model?
A) the mine workers B) the teamsters C) the carpenters D) the steelworkers
c
Inclusive unionism is practiced mostly by:
A) professional and semiprofessional employees.
B) small unions comprised of skilled workers, such as the bricklayers.
C) industrial unions.
D) craft unions.
c
A craft union attempts to increase wage rates by:
A) equating the MRP and the MRC curves. C) shifting the labor supply curve to the right.
B) shifting the labor supply curve to the left. D) shifting the MRP curve to the right.
b
Occupational licensing has much the same effect as:
A) inclusive unionism. B) exclusive unionism. C) bilateral monopoly. D) monopsony.
b
Occupational licensing:
A) functions essentially the same as inclusive unionism.
B) attracts large numbers of workers and therefore depresses wages.
C) often restricts occupational entry and raises the incomes of licensees.
D) has been declared illegal in the majority of states.
b
If an exclusive union is successful in restricting the supply of labor, the:
A) wage rate will rise.
B) the quantity of labor demanded will rise:
C) the number of job opportunities in the firm or industry will increase.
D) the demand for labor curve will shift leftward.
a
If an industrial union is formed to bargain with a monopsonistic employer, then in this labor market:
A) the resulting wage rate will necessarily be above the competitive level.
B) employment may either increase or decrease.
C) employment will increase.
D) employment will decrease.
b
The electricians union is a good example of:
A) exclusive unionism.
B) countervailing power.
C) how unions can simultaneously increase wage rates and employment by increasing the demand for
labor.
D) inclusive unionism.
a
Exclusive unionism attempts to increase wage rates by:
A) decreasing the supply of labor.
B) setting a minimum or standard wage above the competitive level.
C) increasing the supply of labor.
D) increasing the demand for labor through productivity increases.
a
Labor unions may attempt to raise wage rates by:
A) increasing the supply of labor.
B) forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.
C) decreasing the demand for labor.
D) increasing the price of complementary resources.
b
Construction workers frequently sponsor political lobbying in support of greater public spending on
highways and public buildings. One reason they do this is to:
A) restrict the supply of construction workers.
B) increase the elasticity of demand for construction workers.
C) increase the demand for construction workers.
D) increase the price of substitute inputs.
c
Unions often oppose increases in the prices of complementary inputs (for example, truckdrivers may
oppose increases in taxes on diesel fuel). They do this because increases in the prices of complementary
inputs might:
A) increase the supply of competing labor through the output effect.
B) increase the supply of competing labor through the substitution effect.
C) decrease the demand for union labor through the output effect.
D) decrease the demand for union labor through the substitution effect.
c
Labor unions are restrained in their wage demands because:
A) legislation limits annual increases in nominal wages to 6 percent.
B) the labor demand curve is downsloping.
C) marginal wage cost curves lie above labor supply curves in most labor markets.
D) most unions deal with monopsonists who have superior bargaining power.
b
A union might increase the demand for the labor services of its members by:
A) decreasing the demand for the product it is producing.
B) enhancing the productivity of its members.
C) decreasing the prices of substitute inputs.
D) increasing the prices of complementary inputs.
b
Authoritative estimates suggest that currently union workers on the average:
A) achieve no wage advantage over nonunion workers in the same occupation.
B) realize a 5 percent wage advantage over nonunion workers in the same occupation.
C) realize a 20-30 percent wage advantage over nonunion workers in the same occupation.
D) realize a 15 percent wage advantage over nonunion workers in the same occupation.
d
In a labor market characterized by bilateral monopoly the wage rate will:
A) be logically indeterminate.
B) be established at the level desired by the union.
C) be established at the level desired by the employer.
D) always be established at the competitive level.
a
If a single large employer bargains with an inclusive union, the resulting labor market model can best be
described as:
A) a cartel. B) countervailing power. C) a bilateral monopoly. D) an internal labor market.
c