Author Question: An increase in the equilibrium quantity of a product will result A) when there is an decrease in ... (Read 70 times)

809779 · **on:** Jun 29, 2018

An increase in the equilibrium quantity of a product will result

A) when there is an decrease in demand and a decrease in the cost of inputs used to make the product.
B) when there is an increase in supply and an increase in demand for the product.
C) when the quantity of the product supplied exceeds the quantity demanded.
D) when there is an increase in supply and a decrease in demand for the product.

Question 2

What is the effect of a minimum wage law in a monopsony labor market?

What will be an ideal response?

Joc · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

A minimum wage rate can increase employment in a monopsony market. Over a range of employment, a minimum wage can lower the cost of hiring additional workers for a monopsony. In the absence of the minimum wage, the marginal cost of labor, MCL, curve exceeds the wage rate because hiring another worker requires that the firm must boost the pay of all its workers. With a minimum wage, hiring another worker at this wage rate requires that the firm pay this worker the minimum wage but the firm does not raise the wage rate paid its others workers because they, too, are paid the minimum wage. As a result, in this range of employment, a monopsony's cost of hiring another worker is lower with a minimum wage. The lower cost of hiring workers leads the monopsony to increase its employment.