PCLM and Monopsony

Marginal revenue product (MRP) of labor refers to the:

• . increase in total revenue resulting from the sale of an additional unit of output.

• amount by which a firm's total resource cost increases when it employs one more unit of labor.

• increase in total revenue resulting from the hire of one more unit of labor.

• price at which additional units of labor can be employed in a monopsonized labor market.

Marginal resource cost refers to the

• increase in total revenue resulting from the sale of the extra output of one more worker.

• price at which additional units of a resource can be hired in an imperfectly competitive resource market

• increase in total cost resulting from the production of one more unit of output

• amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource

If a firm is hiring a certain type of labor under purely competitive conditions

• its labor demand curve will be perfectly elastic at the market-determined wage rate

• the labor supply curve will lie above the marginal labor cost curve

• the labor supply and marginal labor (resource) cost curves will coincide and be upsloping

• the labor supply and marginal labor (resource) cost curves will coincide and be perfectly elastic

A firm operating in a purely competitive resource market faces a resource supply curve that is

• . perfectly inelastic

• perfectly elastic

• highly inelastic

• highly elastic

A profit-maximizing firm will

• expand employment if marginal revenue product exceeds marginal resource cost

• reduce employment if marginal revenue product exceeds marginal resource cost

• expand employment if marginal revenue product equals marginal resource cost

• reduce employment if marginal revenue product equals marginal resource cost

The labor supply curve facing a purely competitive employer is __________ whereas the labor supply curve facing a monopsonist is ___________.

• . upward sloping; horizontal

• downward sloping; vertical

• vertical; upward sloping

• horizontal; upward sloping

The economic term for a sole employer in a nonunion community is

• monopsonist

• monopolist

• bilateral competitor

• bilateral monopolist

In a monopsonistic labor market the employer will maximize profits by employing workers up to that point at which

• the difference between the wage rate and marginal resource (labor) cost is at a maximum

• marginal revenue product equals marginal resource (labor) cost

• the wage rate equals marginal revenue product

• the wage rate equals marginal resource (labor) cost

A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is

• $9

• $10

• $15

• $21

Suppose the MRP of a firm's twelfth worker is $22 and the worker's marginal wage cost is $16. We can say with certainty that the firm

• is hiring labor in a competitive labor market at a wage rate of $16

• is hiring labor in a monopsonistic labor market

• will find it profitable to hire fewer workers

• will find it profitable to hire more workers