Your answer to the previous question can be explained by the differences in the Marginal Cost and Average Total Cost faced by a monopsony vs a perfectly competitive firm. A monopsony's Marginal Cost curve shifts upward, compared to a perfectly competitive firm. A monopsony's ATC curve shifts down and left, compared to a perfectly competitive firm. Why is that the case? O Higher MC curve: A perfectly competitive firm faces an increasing wage. A monopsonist faces a decreasing wage as labor increases Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average total cost, and earn positive profits Higher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higher wage as it hires less labor Lower ATC curve: By increasing the quantity of labor employed, a monopsonist can lower its average total cost, and earn positive profits O Higher MC curve: A perfectly competitive firm faces a higher price on inputs, and a monopsonist can pay lower price for inputs Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can increase its average total cost. thus increasing profits O Higher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higher wage as it hires more labor Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average total cost, and earn positive profits
Your answer to the previous question can be explained by the differences in the Marginal Cost and Average Total Cost faced by a monopsony vs a perfectly competitive firm. A monopsony's Marginal Cost curve shifts upward, compared to a perfectly competitive firm. A monopsony's ATC curve shifts down and left, compared to a perfectly competitive firm. Why is that the case? O Higher MC curve: A perfectly competitive firm faces an increasing wage. A monopsonist faces a decreasing wage as labor increases Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average total cost, and earn positive profits Higher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higher wage as it hires less labor Lower ATC curve: By increasing the quantity of labor employed, a monopsonist can lower its average total cost, and earn positive profits O Higher MC curve: A perfectly competitive firm faces a higher price on inputs, and a monopsonist can pay lower price for inputs Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can increase its average total cost. thus increasing profits O Higher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higher wage as it hires more labor Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average total cost, and earn positive profits
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Your answer to the previous question can be explained by the differences in the Marginal Cost and
Average Total Cost faced by a monopsony vs a perfectly competitive firm.
A monopsony's Marginal Cost curve shifts upward, compared to a perfectly competitive firm.
A monopsony's ATC curve shifts down and left, compared to a perfectly competitive firm.
Why is that the case?
O Higher MC curve: A perfectly competitive firm faces an increasing wage. A monopsonist faces a decreasing wage
as labor increases
Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average total cost,
and earn positive profits
O Higher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higher wage as
it hires less labor
Lower ATC curve: By increasing the quantity of labor employed, a monopsonist can lower its average total cost,
and earn positive profits
Higher MC curve: A perfectly competitive firm faces a higher price on inputs, and a monopsonist can pay lower
price for inputs
Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can increase its average total cost,
thus increasing profits
Higher MC curve: A perfectly competitive firm faces a constant wage. A monopsonist has to pay a higher
wage as it hires more labor
Lower ATC curve: By restricting the quantity of labor employed, a monopsonist can lower its average total
cost, and earn positive profits
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