1. Under what conditions might one expect wages to be above the prevailing compe

ID: 1118421 • Letter: 1

Question

1. Under what conditions might one expect wages to be above the prevailing competitive levels?

a. In no situation is that outcome possible.

b. in the case where a union exists

c. only in cases in which the employer has market power in the product market

d. only in cases in which the employer has market power in the labour market

2. If an employer is competitive in the labour market:

a. It has to pay at least the going wage.

b. Its labour supply curve is inelastic.

c. It can affect the going market wage by either hiring many workers or laying off many workers.

d. It can pay lower than the market equilibrium wage.

3. What is the primary difference between a monopsonist and a firm which operates in a perfectly competitive labour market?

a. In order to recruit another worker, the monopsonist incurs a larger increase in labour costs.

b. In order to recruit another worker, the monopsonist incurs a smaller increase in labour costs.

c. The monopsonist hires such that the marginal revenue product of labour is equal to the marginal labour cost, but the non-monopsonist does not.

d. The labour supply curve is irrelevant for the monopsonist.

4. Consider Figure 7.6 in the textbook. The equilibrium wage and employment levels for the firm in a perfectly competitive labour market are:

a. VMPW and NM.

b. WM and NM.

c. WC and NC.

d. WM and NC.

5. Which of the following statements is false?

a. A monoposonist faces an upward sloping supply curve.

b. The monopsonist earns a profit because it pays its workers less than their reservation wage.

c. A monopsonist can lower the wages that it pays without losing its entire labour force.

d. A firm operating in a perfectly competitive labour market cannot lower the wage that it pays without losing some of its workforce.

1> b. in the case where a union exists .

reason

If a union for labor exists, they can force a competitive wage from an employer of labor.

2> a. It has to pay at least the going wage.

reason

No workers will work for a job which pays lower than that.

3> a. In order to recruit another worker, the monopsonist incurs a larger increase in labour costs.

Reason

In a monopsony, the labor side has significant market power.

4> Missing Figure

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