Senator Approxmire Opposes a Proposal Requiring That the Monopsonist Pay

Multiple Choice

Senator Approxmire opposes a proposal requiring that the monopsonist pay a minimum wage of at least W_min,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 W_A,which is higher than W_min,and maintain its employment at L₁.
C) incorrect because the monopsonist's effective MRC curve becomes ABCD,which means that it would choose to hire more workers,from L₁ to L₂,following the imposition of the minimum wage.
D) correct because the graph indicates that at the wage of W_min,the monopsonist would not make a profit from hiring labor and so would not hire any at all.