Why does a monopsony increase employment when faced with an effective minimum wage law?
What will be an ideal response?
A monopsony hires the quantity of labor so that the value of marginal product of labor (VMP) is equal to the marginal cost of labor (MCL). This condition means that initially the VMP is above the wage (W). When a minimum wage is imposed, the marginal cost of labor decreases because it becomes equal to the minimum wage. Thus, the firm will hire more workers up to the point at which VMP = W.
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A sudden rise in input prices which drives up the marginal cost of producing automobiles will shift the supply curve of automobiles upward
Indicate whether the statement is true or false
How might a country that is poor in natural resources but rich in labor increase productivity in a way that leads to sustained economic growth?
a. by restricting trade with foreign countries b. by encouraging citizens to consume most of their incomes c. by increasing the quantity and quality of its capital d. by striving to increase the population