22. A firm hiring labor in a purcly competitive labor market is a wage taker bec
ID: 1154532 • Letter: 2
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22. A firm hiring labor in a purcly competitive labor market is a wage taker because: cach firm employs a small fraction of the total labor supply for a specific type of labor cach firm employs workers who can easily be replaced by capital. the demand for labor is a derived demand. the firm sets the wage rate. a. b. d. 23. The competitive labor market model predicts that advances in technology that increase labor productivity will: decrease the supply of labor causing wages to rise. b. increase the supply of labor causing wages to fall. c. decrease the demand for labor causing wages to fal. d. increase the demand for labor causing wages to rise. 24. In 2016 a plague kills approximately one-third of America's population. The competitive labor market a. an increase in the supply of labor lcading to a fall in the MRPL and a fall in wages. b. a decrease in the supply of labor lcading to a rise in the MRPL and a rise in wages. c. an increase in the demand for labor and a rise in wages d. a decrease in the demand for labor and a fall in wages 25. A monopsony refers to a market with wage rates that cannot change. b. a few large firms c. one employer d. one seller A firm hiring workers in an imperfectly competitive labor market is currently paying $8 per hour and employing 20 units of labor. If it wants to hire another unit of labor, it will have to raise the wage for all labor to $9 per hour. The firm's marginal labor cost is 26. a. $189 b. 29 When a monopsony pays a higher wage to attract an additional worker it must pay that higher wage to all the workers it is currently employing at a lower wage. The economic significance of this is that the employer's marginal labor cost curve: 27. a. is perfectly elastic b. isthe same as its labor supply curve. c. lies above its labor supply curve. d. lies below its labor supply curve.Explanation / Answer
22. A firm hiring labour in a perfectly competitive labor market is a wage taker because each firm employs a small fraction of the total labor supply for a specific type of labor. Hence the correct answer is (A).
23. The competitive labor market model predicts that advances in technology that increase labor productivity will lead to fall in demand for labor and thus cause the wages to fall. Since now 1 person can do a job of 2 persons, demand for labor drops and so does wage. The correct answer is (C).
24. Due to the plague, the supply of labor will fall and consequently, the MRPL and wages shall rise. The correct answer is (B).
25. A monopsony refers to a market with a single employer. The correct answer is (C).
26. The firm's marginal cost for the 21st unit of labor is $29. This includes the $9 of the 21st unit and the $1 each of the first 20 units. The correct answer is (B).
27. The significance of this is that the employer's marginal cost curve is above the labor supply curve. Hence the correct answer is (C).
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