Practice Questions
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In a monopsony labor market, what is a key characteristic that distinguishes it from a competitive labor market?
In a monopsony, there is only one employer. Other options are incorrect because Many employers and many workers suggest competition; Workers in a mono...
In a monopsony labor market, which of the following labor market policies would most likely improve wage conditions for workers?
A minimum wage sets a floor for how low wages can go. Other options are incorrect because Subsidizing employers might seem good, but it can let them p...
In a monopsony labor market, how does the presence of a single buyer affect market efficiency compared to a competitive labor market?
In a monopsony, there is only one buyer for labor. Other options are incorrect because Some might think that having one buyer means they pay more; Peo...
In a monopsony labor market, which of the following outcomes is most likely to occur due to the firm's market power over labor wages?
In a monopsony, one employer has a lot of power over wages. Other options are incorrect because Some might think that a powerful employer pays higher ...
In a monopsony labor market, what is the primary characteristic that differentiates it from a competitive labor market?
In a monopsony, there is only one buyer of labor. Other options are incorrect because This option confuses buyers and sellers; Collective bargaining m...
In a monopsony labor market, which of the following best describes the employer's power over wage setting?
In a monopsony, there is only one main employer. Other options are incorrect because This answer suggests the employer has no control over wages; This...
In a monopsony labor market, which of the following best describes the characteristics of the employer's power over wages?
In a monopsony, there is only one main employer. Other options are incorrect because This answer suggests that competition keeps wages high; This opti...
In a monopsony labor market, what is the primary characteristic that distinguishes it from a competitive labor market?
In a monopsony, there is only one buyer of labor. Other options are incorrect because This answer suggests there are many buyers, which is not true in...
In a monopsony labor market, which of the following statements are true? (Select all that apply)
In a monopsony, the employer has too much power, affecting wages and employment negatively. Other options are incorrect because It's a common belief t...
Which of the following scenarios best exemplifies a monopsony labor market, and why does it fit this classification?
In a monopsony, there is only one main employer. Other options are incorrect because This option suggests many companies are competing for workers; He...
In a monopsony labor market, what is the primary reason the employer can influence wages?
In a monopsony, there is only one employer. Other options are incorrect because This suggests workers can't find any other jobs; This implies that the...
In a monopsony labor market, how does the employer decide on the optimal number of workers to hire?
An employer hires workers until the cost of hiring one more worker equals the extra money they make from that worker. Other options are incorrect beca...
Monopsony labor market dynamics are to wage setting as competitive labor market dynamics are to what?
In a competitive labor market, employers accept the wage set by the market. Other options are incorrect because Some might think wages are always the ...
In a monopsony labor market, if a firm experiences an increase in its marginal revenue product due to higher demand for its goods, what is the likely effect on wages and employment levels for workers?
When a firm makes more money from selling its goods, it can afford to pay workers more. Other options are incorrect because This option suggests that ...
In a small town, there is only one factory that hires workers, creating a monopsony labor market. The factory is considering hiring additional workers but is facing rising marginal costs due to limited labor supply. If the factory's marginal revenue product of labor for the next worker is $15 and the marginal cost of hiring that worker is $20, what should the factory do to maximize its profits?
The factory should not hire the worker. Other options are incorrect because Some might think that since the revenue is high, hiring is a good idea; Th...
Arrange the following steps in the correct order to analyze hiring decisions in a monopsony labor market: A) Identify the marginal revenue product of labor, B) Analyze the marginal cost of hiring additional workers, C) Determine the optimal number of workers to hire, D) Compare marginal revenue product and marginal factor cost.
First, you find out how much extra money each worker brings in, called the marginal revenue product. Other options are incorrect because This order st...
In a monopsony labor market, the optimal quantity of workers is determined by the point where the __________ equals the marginal factor cost.
The marginal revenue product is the extra money a company makes from hiring one more worker. Other options are incorrect because Some might think the ...
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