1. Which of the following statements is false? a. A monoposonist faces an upward
ID: 1119116 • Letter: 1
Question
1. 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.
2. Empirical evidence on the practical importance of minimum wage laws suggests:
a. that they do reduce the employment levels of younger and unskilled workers to a minor extent - a weak disemployment effect.
b. that they do reduce the employment levels of younger and unskilled workers to a major extent - a strong disemployment effect.
c. that their impact on the employment level is nil.
d. that their impact on employment is actually favourable because they put more money in the hands of poorly paid workers, stimulating consumer spending, thus promoting economic growth.
Explanation / Answer
1. Which of the following statements is false?
Solution: The monopsonist earns a profit because it pays its workers less than their reservation wage
Explanation: It is not necesaary that monopsonist earns a profit on all of its workers
2) Empirical evidence on the practical importance of minimum wage laws suggests
Solution: That they do reduce the employment levels of younger and unskilled workers to a minor extent - a weak disemployment effect
Explanation: Overall, the evidence suggests that minimum wages leads to unemployment. The employer will cut down labor because legislated hikes the labor costs and do not increase worker productivity.
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