Chapter 13R, Problem 15MCQ

To determine

The correct option that defines the reason for MFCL curve lies above the supply curve for monopsony.

Answer to Problem 15MCQ

Option d is correct.

Explanation of Solution

Explanation for correct option:

d.

If marginal factor cost of labor curve lies above the supply curve then it refers to the situation where firm has to increase the cost of hiring labors if additional workers are required. This happens when all workers are getting similar pay. Therefore, option d is correct.

Explanation for incorrect options:

a.

Diminishing marginal returns refers to the condition when percentage of output reduces as the percentage of input is increased. Therefore, option a is incorrect.

b.

Increasing marginal returns is the situation when cost of production reduces and the output produced is increased. Therefore, option b is incorrect.

c.

If different workers received different wages then it can happen due to different work which cannot be compared. Therefore, option c is incorrect.

e.

Whenever workers want to increase their leisure then supply of the labor reduces as they are enjoying being paid higher wages and does not want to work for more hours. Therefore, option e is incorrect.

Economics Concept Introduction

Factor of production: Factor of production refers to the components or the resources that are required for producing intangible or tangible products.

Factor income: Factor income refers to returns received by the producer for inserting each factor of production as an input.