Chapter 13R, Problem 16MCQ

To determine

The correct option that defines the situation for monopsony for hiring additional workers.

Answer to Problem 16MCQ

Option b is correct.

Explanation of Solution

Explanation for correct option:

b.

In monopsony firms, if additional worker is hired then the wage rates are increased and also raising wage rates of workers which could be paid less. Thus, in monopsony, high wage rates are offered for hiring even few workers. Therefore, option b is correct.

Explanation for incorrect options:

a.

At higher wage rates more workers are not hired because wages paid by the monopsony firm increases as additional workers are hired along with the workers that were being paid less. Therefore, option a is incorrect.

c.

In monopsony firm, there is only single firm hiring labors. Due to this, wages paid are generally lower as compared to wages paid in competitive firms. These firms do not hire more workers. Therefore, option c is incorrect.

d.

For hiring an additional worker, monopsony firm must increase the wage rates due to which they hire fewer workers. Therefore, option d is incorrect.

e.

The monopsony firm does not hire same amount of workers as compared to competitive firms as they are the single firms hiring labor. 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.