Deck 14: Imperfectly Competitive Markets for Factors of Production

Question 1

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.

Answer 1

$10.

Question 2

The factor supply curve for a monopsonist is:

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

Answer 2

positively sloped.

Question 3

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.

Answer 3

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

Question 4

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 5

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 6

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.

Question 7

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 8

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.

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

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 11

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 12

The marginal factor cost curve for a monopsonist is:

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

Question 13

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 14

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 15

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 16

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 17

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 18

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.

Question 19

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 20

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 21

Use the following to answer question(s): Supply and Marginal Factor Cost

(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 22

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 23

Use the following to answer question(s): Supply and Marginal Factor Cost

(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

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 25

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 26

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

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

Question 27

Use the following to answer question(s): Supply and Marginal Factor Cost

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

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

Question 28

Use the following to answer question(s): Supply and Marginal Factor Cost

(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 29

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 30

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 31

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 32

Use the following to answer question(s): Supply and Marginal Factor Cost

(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 33

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 34

Monopsony is the _______ counterpart of _______ .

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

Question 35

Use the following to answer question(s): Supply and Marginal Factor Cost

(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 36

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 37

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 38

Use the following to answer question(s): Supply and Marginal Factor Cost

(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 39

Use the following to answer question(s): Supply and Marginal Factor Cost

(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 40

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 41

Use the following to answer question(s): Monopsony

(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 42

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 43

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 44

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 45

Use the following to answer question(s): Monopsony

(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 46

Use the following to answer question(s): Monopsony

(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 47

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

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

Question 48

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 49

Use the following to answer question(s): Monopsony

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

A) L₀
B) L₁
C) L₂
D) L₃

Question 50

Use the following to answer question(s): Monopsony

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

A) MRP₁; L ₁.
B) W₂; L₁.
C) W₂; L₃.
D) W₁; L₂.

Question 51

Use the following to answer question(s): Wage-Employment Model in Perfectly Competitive and Monopsony Factor Markets

(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 52

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 53

Use the following to answer question(s): Monopsony

(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

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 55

Use the following to answer question(s): Wage-Employment Model in Perfectly Competitive and Monopsony Factor Markets

(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 56

Use the following to answer question(s): Wage-Employment Model in Perfectly Competitive and Monopsony Factor Markets

(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 57

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 58

Use the following to answer question(s): Wage-Employment Model in Perfectly Competitive and Monopsony Factor Markets

(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 59

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 60

Use the following to answer question(s): Monopsony

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

A) L₀
B) L₁
C) L₂
D) L₃

Question 61

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 62

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 63

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

(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 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

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

(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 66

The Case in Point on the salaries of professional baseball 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 67

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 68

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

(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 Pₒᵤtpᵤt
C) MR = MC; MRP = MFC
D) P > MC; factor price > MFC

Question 69

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

(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 Qm; factor price and quantity in equilibrium are P₀ and FQ₁
D) P = MC; factor price = MRP

Question 70

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 71

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

(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 72

According to the Case in Point on professional baseball player salaries,:

A) monopsony power of Major League Baseball (MLB) teams is lowest for free agents.
B) monopsony power of MLB teams is highest for free agents.
C) monopsony power of MLB teams has been increasing over time.
D) monopsony power of MLB teams has stayed the same over time.

Question 73

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 74

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

(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 75

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 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

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 78

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

(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 79

Use the following to answer question 63-70.
Exhibit: Monopoly and Monopsony

(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 80

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.