ECO339H1 Chapter Notes - Chapter 7: Monopolistic Competition, Prevailing Wage, Monopsony

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30 Nov 2016

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In both cases, their supply schedules for a given homogeneous type of labour are perfectly elastic at the market wage rate. Can employ all of the labour they want at this market wage rate. The market wage rate for this specific, homogeneous type of labour is determined by the interaction of supply and demand in the aggregate labour market. The market demand curve is the summation of the demand curves of the individual firms. When the firm is a competitive buyer of labour, it faces a perfectly elastic supply of labour at the market wage. In the short run a firm that is competitive in the labour market may have to raise its wages in order to attract additional workers. This situation is often referred to in the literature as dynamic monopsony. Temporary wage increases above the competitive norm are consistent with the firm being a competitive buyer of labour in the long run.

Related Questions

17. All of the following can raise union member wages except:

a. limiting union membership over time

b. increasing the demand for non-union made goods

c. increasing the productivity of union workers

d. increasing the demand for union-made goods

12. If a firm wants to maximize its profits, it should

a. equates the marginal revenue product for each input to the price of the input

b.hire unskilled labour rather than skilled labour since unskilled labour is cheaper

c. hire lots of capital and very little labour since labour needs to be trained

d. equate the marginal physical product for each input to the price of the input

10. A profit-maximizing monopolist will hire labour up to the point where

a. marginal revenue equals than the wage rate.

b. marginal revenue product is greater than the wage rate.

c. marginal revenue equals the price of the product.

d. marginal revenue product is less than the wage rate.

9. The practice of outsourcing has been given a boost by:

a. firms that are becoming more risk-averse.

b. advances in telecommunications and computer networking.

c. support from organized labour.

d.sharp increases in the cost of overseas labour.

8. Suppose firms in an industry hire unskilled labour and skilled labour. unskilled labour is a substitute for capital and skilled labour is a complement with capital. A decrease in the real price of capital would:

a. cause the demand for unskilled labour to increase and the demand for skilled labour to decrease. the wage of unskilled labour would rise relative to the wage of skilled labour

b. cause the demand for both kinds of labour to decrease. wages rates of both kinds of labour would decrease too.

c. cause the demand for labour to increase, raising wages of both skilled and unskilled labour.

d. cause the demand for unskilled labour to decrease and the demand for skilled labour to increase. the wage of unskilled labour would decrease relative to the wage of skilled labour.

emeraldsardine618

1. In a perfectly competitive industry, an individual firm faces:

a. a perfectly elastic labour supply curve

b. a perfectly inelastic labour supply curve

c.a perfectly vertical labour supply curve

d.none of the above

2. A firm purchases more capital equipment. We would expect to observe:

a. an increase in the supply of labour for this firm

b. a decrease in the supply curve of labour for this firm

c.an increase in the wage rate paid for labour by this firm

d.an increase in the demand for labour by this firm

3. Which of the following would be h most likely outcome if all perfectly competitive firms in a product market join together to form a monopoly?

a. the rate of output in the market will increase but the quantity of labour input will decrease

b.both the rate of output and the quantity of labour input employed will increase

c.the rate of output in the market will decrease but the quantity of labour input will increase

d.both the rate of output and the quantity of labour input employed will decrease

4. what does the marginal revenue product equal when 28 workers are hired in one week?

Labor input (workers per week)__Marginal physical product (output per week)__marginal revenue

25_______________________150_________________________________9.00

26_______________________140_________________________________8.50

27_______________________130_________________________________8.00

28_______________________120_________________________________7.50

29_______________________110________________________________7.00

a. $210

b.$7.50

c.$900

d.$1040

5. The profit-maximizing firm will hire additional workers until:

a. the extra revenue by the last workers hired equals zero

b.the extra cost associated with hiring the last worker equals the price of goods produced

c.the additional cost associated with hiring the last worker equals the average wage rate of workers

d.the additional cost associated with hiring the last worker equals the additional revenue generated by that worker.

rosehyena631

1.Assume that there was a 10 per cent increase in the price of all goods in 2010; if the base year is 2009, then the price index in 2010 will be Select one:

a. 1100. b. 200. c. 90. d. 110.

2.The value of your money income, in terms of buying goods and services, is referred to like your money's

a. transaction cost.

b. rigidity factor.

c. staying power.

d. purchasing power.

3. Unemployment that is caused by business recessions is called

a. frictional unemployment.

b. seasonal unemployment.

c. structural unemployment.

d. cyclical unemployment.

4.All of the following are examples of a flow EXCEPT

a. the current unemployment rate.

b. a person who is fired from a job.

c. an individual who voluntarily leaves the labour force.

d. a new entrant into the labour force.

5.Which one of these factors plays a role in determining the extent and duration of frictional unemployment?

a. the ease with which job seekers can obtain information about job openings

b. the degree to which the overall level of business activity fluctuates up and down

c. the extent to which government legislation requires firms to provide health insurance for employees

d. the education and skill levels of labour force participants

6.Since 1950, the labour force participation rate in the United States

a. of men and women both decreased.

b. of men decreased and for women increased.

c. of men increased and women decreased.

d. of men and women both increased.

7.Increases in the duration of unemployment may

a. reflect a general downturn in economic activity that depresses job openings.

b. increase the unemployment rate.

c. All of these.

d. increase the number of discouraged workers.

8. A discouraged worker is someone who

a. is unemployed.

b. has been fired.

c. is not in the labour force.

d. is employed.

9.In the United States, the wage floor legislated by the government below which it is generally illegal to pay workers is known as

a. the going wage.

b. the employment gap.

c. the minimum wage.

d. the wage ceiling.

10. Which of the following is an effect of a minimum wage law that establishes a ceiling wage below the current market-clearing wage?

a. Surplus labour, or unemployment

b. A decrease in the market-clearing wage

c. A decrease in the quantity of labour supplied

d. An increase in the quantity of labour supplied

11. Which group of individuals most likely benefits from rent controls?

a. low-income wage earners who fail to obtain rental housing

b. the unemployed who fail to obtain rental housing

c. single-parent families without savings or other financial assets who fail to obtain rental housing

d. upper-income professionals who rent apartments at the price ceiling rate

blushsardine736

ECO339H1 Chapter Notes - Chapter 7: Monopolistic Competition, Prevailing Wage, Monopsony

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