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Monopsony - Table
Use the data above to calculate
(1) the quantity of labor this firm will hire to maximize
its profits, and (2) the allocatively efficient quantity
of labor to hire.
Assume the firm hires labor, its
only variable resource, under monopsonistic conditions
and sells its product under competitive
conditions.
Minimum Wage - Traditional
Model
MULTIPLE CHOICE:
1. In the labor market shown above,
with NO MINIMUM WAGE, the equilibrium quantity employed will
be:
A. 0 B.
10C.
12D.
14
2. In the labor market shown above,
if the minimum wage is set at Wm, the equilibrium quantity
employed will be:
A. 0B.
10 C.
12D.
14
3. In the labor market shown above,
the allocatively efficient quantity to employ
is:
A. 0B.
10C.
12D.
14
4. In the labor market shown above,
if the minimum wage is set at Wm, the amount of unemployment
created by the minimum wage is:
A. 2B.
4C.
12D.
14
5. In the labor market shown above,
if the minimum wage is set at Wm, it will cause:
A. Employment to increase
from 10 to 12
B. Employment to increase from 12 to 14
C. Employment to decrease from 14 to 12
D. Employment to decrease from 12 to 10
Minimum Wage in a Monopsony
Model
MULTIPLE CHOICE:
1. Use the figure above to answer
this question., If the minimum wage is set at Wmin, what
will happen to employment in this monopsonistic labor
market?
A. Employment will
decrease
B. Employment will increase
C. Employment will stay the same
D. Employment may increase but usually it tends to stay
the same
2. Use the figure above to answer
this question. Senator Approximire opposes a proposal that
the monopsonist pay a minimum wage of at least Wmin stating
"Even if the labor market is monopsonistic, economic theory
unambiguously demonstrates that imposing a minimum wage
causes employment to fall." Senator Approxmire is:
A. Correct because the
law of demand states that as the wage rises, the firm
demands less labor
B. Incorrect because the
monopsonist would offer a wage of
WA,
which is higher than Wmin, and maintain its employment
level at L1
C. Incorrect because the
monopsonist's effective MRC curve becomes ABCD, which
means that it will choose to hire more workers, from L1
to L2.
D. Correct because the graph
indicates that at the wage of Wmin, the monopsonist would
not make a profit from hiring labor and so would not hire
any at all.
3. Use the figure above to
answer this question,. If the minimum wage is set at Wmin
then:
A. this labor market will
become less efficient
B. this labor market will become more
efficient
4. Use the figure above to answer
this question. The allocatively efficient quantity of labor
is:
A. L1 B.
L2 C.
L3
Minimum Wage and Price Elasticity
of Demand for Labor Model
(Jobs are lost, but do the poor gain more
income?)
MULTIPLE CHOICE:
1. Use the figure above to answer
this question. If the minimum wage is increases from Wmin1
to Wmin2 what will happen to the income received by minimum
wage workers in Labor Market 1?
A.decrease from 0BCD to
0ADF
B.decrease from 0ADF to 0BCD
C.increase from 0ADF to 0BCE
D.increase from 0BCE to 0ADF
2. Use the figure above to
answer this question. If the minimum wage is increases from
Wmin1 to Wmin2 what will happen to the income received by
minimum wage workers?
A. Total incomes decrease
for minimum wage workers in Labor Market 1 because the
demand for labor is elastic
B. Total incomes increase for
minimum wage workers in Labor Market 2 because the demand
for labor is elastic
C. Total incomes increase for
minimum wage workers in Labor Market 1 because the demand
for labor is inelastic
D. Total incomes decrease for
minimum wage workers in Labor Market 2 because the demand
for labor is inelastic
3. Use the figure above to
answer this question. In which labor market is the demand
for labor less price (wage) elastic?
A. Labor Market 1
B. Labor Market 2
4. Use the figure above to answer
this question. Which of the following is correct if the
minimum wage is increased from Wmin1 to Wmin2 ?
A. Total revenues
increase in Labor Market 1 and decrease in Labor Market
2
B. Total revenues decrease in Labor Market 1 and increase
in Labor Market 2
C. Total revenues increase in both labor markets
D. Total revenues decrease in both labor
markets
5. So, even if raising the minimum
wage causes more unemployment, does such an increase help
minimum wage workers?
A.Yes
B. No
C. It depends on the price elasticity of demand for low
skilled labor
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