Suppose the Marginal Value Curve for a Monopsonist Is MV

question 37

Multiple Choice

Suppose the marginal value curve for a monopsonist is MV = 70 - Q, and the marginal expenditure curve is ME = 10 + 2Q. What is the optimal price paid by the monopsonist?

• A) P = 20
• B) P = 50
• C) P = 60
• D) We need to know the AE curve in order to determine the optimal price.

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Definitions:

Market Power

The ability of a company or group of companies to control prices and total market output in an industry or sector.

Elastic Demand

Describes a market scenario where the demand for a product significantly changes in response to changes in the price of that product.

Less Elastic

Less elastic refers to a demand or supply that is relatively unresponsive to changes in price compared to a perfectly elastic curve.

Increase Price

A decision by a supplier or manufacturer to raise the cost at which goods or services are sold.