When Contemplating the Purchase of a Resource, the Pure Monopsonist

question 127

Multiple Choice

When contemplating the purchase of a resource, the pure monopsonist should do which of the following to maximize profit?

• A) Purchase enough to make the marginal expenditure equal to the marginal revenue product.
• B) Purchase enough to make the average expenditure equal to the marginal revenue product.
• C) Pay a wage equal to the value of MRP at the intersection of MRP and ME curves.
• D) Pay a wage equal to the value of MRP at the intersection of AE and MRP curves.

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Definitions:

Marginal Cost

The additional cost incurred from producing one more unit of a product or service.

Decreasing Rate

A situation where the rate of growth or progression reduces over time.

Total Fixed Costs

The sum of all costs that do not change with the level of output, such as rent, salary, and insurance premiums.

Earrings

Jewelery pieces worn on the ear, typically fastened through a hole pierced in the earlobe or another external part of the ear.