Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Factor markets primarily deal with the buying and selling of goods and services.
B
In a monopsony, a single buyer has significant control over the labor market.
C
Derived demand in factor markets means the demand for labor is directly linked to the demand for the products it helps produce.
D
Government interventions in factor markets are unnecessary and often lead to inefficiencies.
E
Wages in a monopsony are typically lower than in competitive labor markets.
Understanding the Answer
Let's break down why this is correct
Answer
Factor markets are places where businesses buy the resources they need to produce goods and services, such as labor, land, and capital. One key characteristic of factor markets is that they help determine the prices of these resources based on supply and demand. For example, if a company needs workers and there are few available, it may have to offer higher wages to attract them. Monopsonies occur when there is only one buyer in a factor market, which can lead to lower wages for workers because the single buyer has more power to set prices. Understanding these concepts helps us see how businesses interact with resources and how that affects the economy.
Detailed Explanation
Other options are incorrect because This option confuses factor markets with product markets; A monopsony is when one buyer controls the market, but this option oversimplifies how labor markets work.
Key Concepts
Factor Markets
Monopsonies
Derived Demand
Topic
Factor Markets and Monopsonies
Difficulty
easy level question
Cognitive Level
understand
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