The Frangle Industry Is a Monopoly, with a Demand Curve

question 17

Multiple Choice

The frangle industry is a monopoly, with a demand curve 100 - p, where p is the price of frangles.It takes one unit of labor and no other inputs to produce a frangle.The Frangle-Makers Guild is a strong union.The guild sets a wage and prevents anyone from working for less than that wage.The frangle monopoly must pay that wage but can hire as much labor as it chooses to.If the guild chooses a wage so as to maximize the total earnings (wage times number of units of labor hired) of frangle makers, then

• A)the price of frangles will be $50.
• B)the price of frangles will be $25.
• C)the price of frangles will equal the wage rate.
• D)the wage rate will be $25.
• E)the wage will be $50.

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