EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 13.6, Problem 1MQ
To determine
To describe: The
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(a) Explain why we might expect labor demand for a monopolist in the product market to be less elastic than labor demand under perfect competition ?
Assuming that the firm is the only producer in a market, the social cost of the output decision of a profit-maximizing monopoly firm. Can you discuss the concept of social cost in terms of the output decision of the monopoly firm? Thank you!
Big Cheese Inc. is the only employer in a small town in rural Louisiana and thus acts as a monopsony-that is, a buyer's monopoly. Its main product is
cheddar cheese, which it sells in a perfectly competitive market. The following graph shows the marginal revenue product of labor (MRP) curve it
faces, its labor supply curve, and its marginal factor cost (MFC) curve.
Use the black point (plus symbol) to indicate the quantity of labor Big Cheese Inc. will hire and the wage rate it will pay for its workers.
WAGE RATE (Dollars per hour)
60
57
54
51
48
45
42
36
33
30
27
12
9
H
MRP
MFC
3
0
0 1 2 3 4
5
6
7
8
9
10
QUANTITY OF LABOR (Workers per hour)
Monopsonistic Outcome
Labor Supply
Big Cheese Inc. will hire
workers at a wage rate of $
per hour.
(?)
Which of the following explains why the MFC curve lies above the labor supply curve?
◇ Each worker must be paid benefits in addition to the wage rate.
○ The marginal cost of hiring an additional worker includes not only that worker's wage but also…
Chapter 13 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 13.1 - Prob. 1MQCh. 13.1 - Prob. 2MQCh. 13.2 - Prob. 1TTACh. 13.2 - Prob. 2TTACh. 13.3 - Prob. 1MQCh. 13.3 - Prob. 2MQCh. 13.5 - Prob. 1MQCh. 13.6 - Prob. 1MQCh. 13.6 - Prob. 1TTACh. 13.6 - Prob. 2TTA
Ch. 13.6 - Prob. 1.1TTACh. 13.6 - Prob. 2.1TTACh. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQCh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.10P
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Similar questions
- Can a monopsony exercise monopsony power if the supply curve it faces is horizontal? Why or why not?arrow_forwardCan a monopsony exercise monopsony power if the supply curve it faces is horizontal? Why or why not? Explain with detail.arrow_forwardIn a bilateral monopoly, suppose we have the following information: P = 1000 - 2Q (Demand) P = 100 + 8Q (Supply) MR = 1000 - 4Q %3D MC = 100 + 16Q What would the price be in the unrestrained monopsony equilibrium using this information?arrow_forward
- If an industry is monopolized, then Labour Demand will be below the Labour Demand under competition. However, if the firm is also a monopsonist than labour demand can be either larger or smaller than under competition. True False A natural monopoly occurs when a firm gains ownership of the entire stock of some natural resource and thus is able to exclude other producers. True Falsearrow_forwardAssuming that the firm is the only producer in a market, the social cost of the output decision of a profit-maximizing monopoly firm. Can you discuss the assumption that the government forces the monopoly firm to lower its price? Would it be possible to show how the output of the firm would increase? Thank you!arrow_forwardWe want to model the oil markets of the 19th century. And let the inverse demand for oil be P = 300 - 2Q, and the marginal cost of producing oil be MC = Q. Standard Oil, during the second half of the 19th century, can be modeled as a monopsony. If we assume the oil market is a monopsony, what is the quantity produced in equilibrium? Give the exact value up to two sig figs after the decimal point.arrow_forward
- The following figure shows the marginal cost [MC]. average cost (AC), and demand [D] curves for a monopsonist in the labor market. Wage ६०००० P3 B P2 Pi AB D MC AC When the monopsonist is in equilibrium, the level of labor employed is A Laborarrow_forwardThe ultimate determinant of monopoly power is the firm’s elasticity of demand. What three factors determine a firm’s elasticity of demand? Explain this in the context of a South African example of a monopoly. How should a monopsonist decide how much of a product to buy? Will it buy more or less than a competitive buyer? Explain.arrow_forwardconsider a dmoestic monopoly in a small country that produces a good with the following inverse demand curve: P = 100 - 1/4Qd. The monopoly has marginal cost of MC = 20 + 1/2Q. In the absence of free trade, complete the following: A) Calculate the equilibrium price and quantity. B) Calculate the consumer surplus, producer surplus (note the shape), and total surplus. Now, suppose the home market opens up to free trade ant that the world price is $60 per unit. C) Calculate the home firm's quantity (supplied), home quantity (demanded), import quantity, and price. D) Calculate the consumer surplus, producer surplus, and total surplus. Now, suppose the home market opens up to free trade, but imposes a tariff of $10. E) Calculate teh equilibrium price and…arrow_forward
- If an industry is monopolized, then Labour Demand will be below the Labour Demand under competition. However, if the firm is also a monopsonist than labour demand can be either larger or smaller than under competition. True or Falsearrow_forwardIf an industry is monopolized, then Labour Demand will be below the Labour Demand under competition, unless the firm is also a monopsonist. True Falsearrow_forwardA monopolist produces commodity Z. Suppose that an ad valorem tax is levied on Z. What are the effects of the tax on the quantity demanded, the price paid by consumers, the price paid by the monopolist, and monopoly profits? Who bears the tax burden? State your assumptions and use a graph to illustrate your conclusions.arrow_forward
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