Senator Approxmire Opposes a Proposal Requiring That the Monopsonist Pay

question 28

Multiple Choice

Senator Approxmire opposes a proposal requiring that the monopsonist pay a minimum wage of at least W_min,stating: "Even if the labor market is monopsonistic,economic theory unambiguously demonstrates that imposing a minimum wage causes employment to fall." Senator Approxmire is:

• A) correct because the law of demand states that as the wage rises,the firm demands less labor.
• B) incorrect because the monopsonist would offer a wage of W_A,which is higher than W_min,and maintain its employment at L₁.
• C) incorrect because the monopsonist's effective MRC curve becomes ABCD,which means that it would choose to hire more workers,from L₁ to L₂,following the imposition of the minimum wage.
• D) correct because the graph indicates that at the wage of W_min,the monopsonist would not make a profit from hiring labor and so would not hire any at all.

---

Definitions:

Notes Payable

A written agreement to pay a specific amount to a lender at a future date, typically including interest payments, classified as a liability on the balance sheet.

Ending Equity

The total value of all ownership interests in the company at the end of the accounting period, after all revenues and expenses are accounted for.

Beginning Equity

The value of an owner's interest in a company at the start of an accounting period.

Revenues

The total amount of money generated by a company from its business activities, such as sales of goods or services, before any expenses are subtracted.