Deck 14: Poverty and Economic Inequality

Question 1

The marginal factor cost curve for a monopsonist is:

A) upward sloping, unlike the horizontal curve for a firm buying factors of production in a perfectly competitive factor market.
B) upward sloping, the same as that for a firm buying factors of production in a perfectly competitive factor market.
C) downward sloping, unlike the horizontal curve for a firm buying factors of production in a perfectly competitive factor market.
D) horizontal, the same as that for a firm buying factors of production in a perfectly competitive factor market.

Answer 1

upward sloping, unlike the horizontal curve for a firm buying factors of production in a perfectly competitive factor market.

Question 2

In a monopsony model of a labor market, as more labor is hired, the marginal factor cost of labor:

A) rises.
B) is constant.
C) is zero.
D) decreases.

Answer 2

rises.

Question 3

In a perfectly competitive factor market, a firm faces a(n):

A) market-determined price for each factor it hires.
B) perfectly elastic demand curve for each factor.
C) inelastic supply curve of each factor.
D) upward-sloping demand curve for its output.

Answer 3

market-determined price for each factor it hires.

Question 4

The perfectly competitive firm's demand curve for labor is:

A) the MFC of labor.
B) MP of labor times the price of output.
C) the addition to revenue resulting from selling an additional unit of the output.
D) the same as its marginal product curve.

Question 5

In a perfectly competitive factor market, the supply of factor to an individual firm is:

A) vertical.
B) horizontal.
C) upward sloping.
D) downward sloping.

Question 6

Suppose that the labor market for clerical workers in a major city includes 1 employer and 100,000 workers. The model that best fits this situation is:

A) monopoly.
B) bilateral monopoly.
C) perfect competition.
D) monopsony.

Question 7

A market in which there is a single buyer of a good, service, or factor of production is a(n):

A) duopoly.
B) oligopoly.
C) monopoly.
D) monopsony.

Question 8

In a factor market characterized by monopsony, the supply of the factor to an individual firm is:

A) vertical.
B) horizontal.
C) upward sloping.
D) downward sloping.

Question 9

Suppose that the labor market for clerical workers in a major city includes 10,000 employers and 100,000 workers. The model that best fits this situation is:

A) monopoly.
B) monopsony.
C) bilateral monopoly.
D) perfect competition.

Question 10

Suppose that a factory in a small city is the only employer for thousands of unskilled workers. The model that best fits this situation is:

A) monopoly.
B) bilateral monopoly.
C) perfect competition.
D) monopsony.

Question 11

Which of the following statements is true, assuming that a firm is a price taker in the labor market?

A) The firm faces a demand curve for labor that is horizontal.
B) The firm faces a supply curve of labor that is horizontal.
C) The firm faces a supply curve of labor that is the MRP of labor.
D) The firm faces a demand curve for labor that is vertical.

Question 12

The factor supply curve for a monopsonist is:

A) positively sloped.
B) negatively sloped.
C) vertical.
D) horizontal.

Question 13

Suppose that a firm hiring labor in a perfectly competitive factor market increases the quantity of labor from 10 workers to 11 workers. If the market wage is $10 per worker, the marginal factor cost for the tenth worker is:

A) $9.
B) $10.
C) $100.
D) $110.

Question 14

Suppose that a firm hiring labor in a perfectly competitive factor market increases the quantity of labor from 10 workers to 11 workers. If the market wage is $20 per worker, the marginal factor cost for the eleventh worker is:

A) $9.
B) $10.
C) $20.
D) $220.

Question 15

A monopsony is a market characterized by:

A) one seller of an output.
B) one buyer of an input.
C) two buyers of an input.
D) many buyers of an input.

Question 16

To maximize profits, a perfectly competitive firm applies the marginal decision rule and thus:

A) sells where P = AVC.
B) hires factors until MP = MFC.
C) hires a factor up to the point that the extra revenue generated by the extra output of the additional unit of the factor is equal to the extra cost of hiring the additional unit of the factor.
D) hires factors until MP = MC.

Question 17

Suppose that a monopsonist increases the number of workers hired from 10 to 11. If the market wage increases from $20 per worker to $21 per worker, the marginal factor cost for the eleventh worker is:

A) $20.
B) $21.
C) $31.
D) $231.

Question 18

The factor supply curve for a monopsonist is:

A) horizontal, the same as that for a firm buying factors of production in a perfectly competitive factor market.
B) upward sloping, the same as that for a firm buying factors of production in a perfectly competitive factor market.
C) upward sloping, unlike the horizontal curve for a firm buying factors of production in a perfectly competitive factor market.
D) downward sloping, the same as that for a firm buying factors of production in a perfectly competitive factor market.

Question 19

Suppose that a firm hiring labor in a perfectly competitive factor market increases the quantity of labor from 20 workers to 21 workers. If the marginal factor cost for the twenty-first worker is $10, the market wage is:

A) $10.
B) $11.
C) $200.
D) $210.

Question 20

The marginal factor cost curve for a monopsonist is:

A) vertical.
B) horizontal.
C) negatively sloped.
D) positively sloped.

Question 21

A market in which there is a single buyer of a good, service, or factor of production is called a:

A) monopoly.
B) factor monopoly.
C) monopsony.
D) monopolistic factor market.

Question 22

(Exhibit: Supply and Marginal Factor Cost) How many units of the factor will be supplied at a factor price of $6?

A) 2
B) 3
C) 4
D) It cannot be determined.

Question 23

(Exhibit: Supply and Marginal Factor Cost) Given _______ in the _______ market, the ________ curve lies _______ the supply curve.

A) perfect competition; product; MFC; below
B) monopoly; factor; MRP; above
C) monopsony; factor; MFC; above
D) perfect competition; factor; MFC; above

Question 24

The wage paid by a firm buying labor in a monopsonistic market:

A) is greater than the wage in the situation where the monopsony firm was broken up into a large number of firms buying inputs in a perfectly competitive factor market.
B) is less than the wage in the situation where the monopsony firm was broken up into a large number of firms buying inputs in a perfectly competitive factor market.
C) decreases with the quantity of labor hired.
D) does not change with the quantity of labor hired.

Question 25

An essential characteristic of imperfect competition in factor markets is that:

A) individual firms face a downward-sloping demand curve for their output.
B) the MFC curve lies above the factor supply curve.
C) P of output is less than MR.
D) MFC is downward-sloping.

Question 26

(Exhibit: Supply and Marginal Factor Cost) How many factors will be supplied at a factor price of $10?

A) 3
B) 4
C) 5
D) It cannot be determined.

Question 27

Monopsony is the _______ counterpart of _______ .

A) seller's; monopoly
B) seller's; monopsony
C) buyer's; monopsony
D) buyer's; monopoly

Question 28

The wage paid by a firm buying labor in a monopsonistic market:

A) is greater than the wage in the situation where the monopsony firm was broken up into a large number of firms buying inputs in a perfectly competitive factor market.
B) is equal to the wage in the situation where the monopsony firm was broken up into a large number of firms buying inputs in a perfectly competitive factor market.
C) decreases with the quantity of labor hired.
D) increases with the quantity of labor hired.

Question 29

(Exhibit: Supply and Marginal Factor Cost) The MFC of the third unit of factor is:

A) $8.
B) $10.
C) $14.
D) $18.

Question 30

Suppose that a monopsonist increases the number of workers hired from 10 to 11. If the market wage increases from $10 per worker to $11 per worker, the marginal factor cost for the eleventh worker is:

A) $11.
B) $21.
C) $100.
D) $121.

Question 31

(Exhibit: Supply and Marginal Factor Cost) The MFC of the fourth unit of the factor is:

A) $10.
B) $14.
C) $18.
D) $32.

Question 32

(Exhibit: Supply and Marginal Factor Cost) The MFC is:

A) the change in total cost resulting from adding one more unit of a factor.
B) the change in the quantity of a factor divided by the change in total cost.
C) MP multiplied by the price of the output.
D) less than the factor price after the first unit of factor.

Question 33

Monopoly implies a single _______ and monopsony implies a single _______ .

A) buyer; seller
B) firm; industry
C) industry; firm
D) seller; buyer

Question 34

All other things unchanged, a monopsonistic firm, as compared with the situation where the monopsony firm was broken up into a large number of firms buying inputs in a perfectly competitive factor market, pays a:

A) higher wage and hires less labor.
B) higher wage and hires more labor.
C) lower wage and hires less labor.
D) lower wage and hires more labor.

Question 35

A buyer that faces an upward-sloping supply curve for a good, service, or factor of production is said to have:

A) monopoly power.
B) a competitive market.
C) a bilateral monopoly.
D) monopsony power.

Question 36

(Exhibit: Supply and Marginal Factor Cost) If the supply curve implied in this exhibit is faced by a single firm, it would be a firm:

A) hiring in a perfectly competitive factor market
B) that is a price taker in the factor market.
C) that is called a monopoly seller in the factor market.
D) that is called a monopsony.

Question 37

Given monopsony in a factor market:

A) the supply curve of a factor and the MFC are the same thing.
B) the supply curve of a factor lies below the MFC curve of the factor.
C) the MFC curve of a factor lies below the supply curve of the factor.
D) the MRP curve lies everywhere above the MFC curve.

Question 38

Firms buying factors of production in perfectly competitive factor markets:

A) are price setters in their resource or factor market(s).
B) accept the market price of factors as given.
C) have horizontal demand curves for factors.
D) have upward-sloping demand curves for factors.

Question 39

Monopsony power exists if a buyer faces a(n):

A) upward-sloping demand curve.
B) downward-sloping supply curve.
C) upward-sloping supply curve.
D) horizontal demand or supply curve.

Question 40

(Exhibit: Supply and Marginal Factor Cost) If the MFC curve and the supply curve derived from this exhibit are plotted on a graph, the _______ curve would lie _______ the ________ curve because _______ must be paid to hire an additional factor.

A) supply; above; MFC; more
B) MFC; above; supply; more
C) MFC; below; supply; less
D) supply; below; MFC; less

Question 41

A monopsony firm in the labor market:

A) must pay the same wage to hire more labor.
B) must pay a higher wage to hire more labor.
C) faces a downward sloping supply curve of labor.
D) faces a horizontal supply curve of labor.

Question 42

(Exhibit: Wage-Employment Model in Perfectly Competitive and Monopsony Factor Markets) If this diagram portrayed a monopsony market, the equilibrium wage rate would be:

A) 0H.
B) 0J.
C) 0K.
D) 0L.

Question 43

When buyers have a degree of market power, it is called:

A) monopoly power.
B) price discrimination.
C) differentiation power.
D) monopsony power.

Question 44

(Exhibit: Monopsony) Given perfect competition in the factor market, how much labor will be hired?

A) L₀
B) L₁
C) L₂
D) L₃

Question 45

A profit-maximizing firm following the marginal decision rule will:

A) hire more labor if MRP < MFC.
B) hire less labor if MRP > MFC.
C) hire labor up to the point where MRP = MFC.
D) hire more labor if MRP = 0.

Question 46

A firm buying factors of production in a perfectly competitive factor market will hire labor where:

A) the MR and MC curves cross.
B) MRP = MC.
C) MRP = MFC.
D) MRP = MP of labor times the price of output.

Question 47

A _______ has _______ power if it faces a(n) _______ curve for a factor of production.

A) buyer; monopoly; upward-sloping supply
B) seller; monopoly; upward-sloping demand
C) buyer; monopsony; upward-sloping supply
D) buyer; monopsony; horizontal supply

Question 48

(Exhibit: Wage-Employment Model in Perfectly Competitive and Monopsony Factor Markets) If this diagram portrayed a perfectly competitive market, the equilibrium-wage rate would be:

A) 0H.
B) 0J.
C) 0K.
D) 0L.

Question 49

(Exhibit: Monopsony) Given ________ in the labor market, labor receives a wage that is _______ the MRP; in _______ , labor receives a wage that is ________ MRP.

A) monopoly; less than; perfectly competitive factor markets; greater than
B) monopsony; less than; perfectly competitive factor markets; equal to
C) perfect competition; equal to; monopsonistic factor markets; greater than
D) perfect competition; less than; monopsonistic factor markets; equal to

Question 50

A firm that has a dominant position in a local labor market may have _______ power in that market.

A) monopoly
B) monopolistic
C) key-industry
D) monopsony

Question 51

(Exhibit: Monopsony) Which of the following is (are) true?

A) Given perfect competition in the factor market, the price of a factor is equal to the MFC.
B) Given imperfect competition in the factor market, the price of a factor is less than the MFC.
C) Given perfect competition in the product market, MRP = MP times the price of output, and given imperfect competition in the product market, MRP = MP times MR, which is less than MP times price.
D) All of the above are true.

Question 52

For the monopsony firm:

A) MRP is MP times MR.
B) MRP is the price of the input times MP.
C) MFC is less than the price of labor.
D) MFC = MR in equilibrium.

Question 53

(Exhibit: Monopsony) Given perfect competition in the factor market, the wage would be:

A) determined where the MRP < MFC.
B) W₂.
C) W₁.
D) MRP₁.

Question 54

(Exhibit: Monopsony) Given monopsony in the factor market, how much labor will be hired?

A) L₀
B) L₁
C) L₂
D) L₃

Question 55

(Exhibit: Wage-Employment Model in Perfectly Competitive and Monopsony Factor Markets) If this diagram portrayed a perfectly competitive factor market, the equilibrium-employment level would be:

A) between 0N and 0T.
B) 0S.
C) 0T.
D) 0J.

Question 56

A firm that is a monopsony in its market for a factor of production:

A) faces a horizontal supply curve of labor.
B) constitutes the entire market for the factor.
C) is a factor price taker.
D) can't change the quantity of the factor it hires.

Question 57

(Exhibit: Wage-Employment Model in Perfectly Competitive and Monopsony Factor Markets) If this diagram portrayed a monopsony factor market, the equilibrium employment level would be:

A) between 0N and 0T.
B) 0H.
C) 0T.
D) 0S.

Question 58

(Exhibit: Monopsony) Given monopsony in the factor market, the equilibrium wage and quantity of labor would be:

A) MRP₁; L _1.
B) W₂; L_1.
C) W₂; L_3.
D) W₁; L_2.

Question 59

(Exhibit: Monopsony) Given monopsony in the factor market, the wage would be:

A) determined where MRP > MFC.
B) determined where MRP < MFC.
C) W₂.
D) W₁.

Question 60

Under perfect competition in the product market, the price of a product will be ________ MC, and under perfect competition in the factor market, the price of a factor will be _______ MRP.

A) greater than; less than
B) less than; greater than
C) equal to; equal to
D) greater than; greater than

Question 61

(Exhibit: Monopoly and Monopsony) In Panel (a), if the quantity of production is carried to the right of point E:

A) MR < MC
B) MR = P
C) MR > P
D) MRP > MFC

Question 62

The considerable differences in the wages of minor league athletes and major league athletes since 1977 is most likely due to:

A) chance or luck.
B) work effort.
C) differences in their respective marginal revenue products.
D) the strength of the major league union.

Question 63

(Exhibit: Monopoly and Monopsony) In Panel (b), if the factor is hired beyond the quantity FQ₁:

A) MRP > MC.
B) MR = P.
C) MR < MFC.
D) MRP >MFC.

Question 64

Colleges and universities in small towns generally pay part-time instructors ________ they pay full-time instructors per credit-hour.

A) more than
B) less than
C) about the same as
D) about 10 percent of what

Question 65

The monopoly sets its product _______ based on the _______ curve it faces, and monopsony sets its factor _______ based on the _______ curve it faces.

A) price; demand; price; MRP
B) price; demand; price; factor supply
C) profit; profit; supply; factor price
D) price; supply; price; demand

Question 66

Monopoly is a _______ in the _______ market, and monopsony is a _______ in the ________market.

A) price taker; product; price taker; factor
B) price setter; factor; price taker; product
C) price setter; product; price setter; factor
D) price setter; product; price taker; factor

Question 67

(Exhibit: Monopoly and Monopsony) In monopoly, the equilibrium quantity of output will be where ________ , and in monopsony, equilibrium quantity of input will be where ________.

A) P = MC; MRP = MFC
B) MR = MC; MRP = MP times P_output
C) MR = MC; MRP = MFC
D) P > MC; factor price > MFC

Question 68

According to the Case in Point of professional sports player salaries, a 1974 study of baseball player salaries by Gerald Scully found that:

A) star players were paid less than 20 percent of their full value to team owners as measured by their marginal revenue product.
B) mediocre players were paid more than star players.
C) average players were paid the full value of their marginal revenue product.
D) mediocre players were paid less than the full value of their marginal revenue product.

Question 69

The monopsony model predicts that athletes facing monopsony employers will receive _______ that are ________ than their _______ .

A) wages; less; MRPs
B) MRPs; greater; MFCs
C) wages; greater; MRPs
D) MFCs; greater; MRPs

Question 70

(Exhibit: Monopoly and Monopsony) In monopsony, _______ is determined by the point on the ________ curve that corresponds to the profit-maximizing quantity of the factor.

A) factor price; demand
B) factor price; MRP
C) MRP; supply
D) factor price; supply

Question 71

Studies indicate that, before the late 1970s, baseball players were paid:

A) a lot more than their marginal revenue product.
B) a lot less than their marginal revenue product.
C) almost exactly their marginal revenue product.
D) a little more than their marginal revenue product.

Question 72

Monopsonistic factor markets and monopolistic output markets are similar in that both generate:

A) market prices that are less than opportunity costs.
B) an overproduction of output.
C) an efficient allocation of resources.
D) an inefficient allocation of resources.

Question 73

In a competitive labor market, a minimum wage will:

A) establish a price ceiling and lead to unemployment.
B) help all workers.
C) reduce employment.
D) be impossible to enforce.

Question 74

(Exhibit: Monopoly and Monopsony) In monopoly, _______ is determined by the point on the ________ curve that corresponds to the profit-maximizing quantity of output.

A) price; MR
B) price; supply
C) MR = MC; demand
D) price; demand

Question 75

Studies indicate that the labor market for baseball players before the late 1970s was best represented by:

A) duopoly.
B) monopoly.
C) monopsony.
D) perfect competition.

Question 76

Monopsonistic input markets and monopolistic output markets are similar in that both generate:

A) market prices that are not equal to opportunity costs.
B) market prices that are greater than opportunity costs.
C) market prices that are less than opportunity costs.
D) an overproduction of output.

Question 77

The Case in Point on the salaries of professional sports players suggested that the value of a player to the team owners could be measured by his:

A) marginal factor cost.
B) marginal revenue product.
C) number of times at bat.
D) previous performance in the minor leagues.

Question 78

(Exhibit: Monopoly and Monopsony) Panel (a) represents _______ in a product market, and Panel (b) represents _______ in a factor market.

A) monopsony; monopoly
B) duopoly; monopoly
C) monopoly; monopsony
D) monopoly; monopolistic competition

Question 79

(Exhibit: Monopoly and Monopsony) In Panel (b), if activity is carried on at the maximizing level specified by the marginal decision rule:

A) MFC < factor price.
B) MFC = factor price.
C) MFC > factor price.
D) MFC < MRP.

Question 80

(Exhibit: Monopoly and Monopsony) In monopoly, _______ ; in monopsony, ________.

A) P < MC; factor price < MRP
B) the equilibrium price and quantity are P₁ and Q₀; the equilibrium factor price and quantity are P₁ and FQ₁
C) price and quantity in equilibrium are P₁ and Q_m ; factor price and quantity in equilibrium are P₀ and FQ₁
D) P = MC; factor price = MRP