Question

a firms demand for labor is more elastic if _____. A. the firm is a monopoly...

a firms demand for labor is more elastic if _____.
A. the firm is a monopoly
B. the firm’s product is sold in a perfectly competitive market
C. the firm is a monopsony
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Answer #1

Answer: C

This is the market where there is only one purchaser (firm) of labors. Elasticity of labor demand would be high if the purchaser is in monopsony market; since there is no other firm demanding labors, a little increase in wage rate decreases quantity demand of labor in larger effect.

Other options are not correct:

No. A) Monopoly indicates selling items; there may be so many monopoly firms in the market in different fields (like rail, roadways, electricity, etc.); they all demand for labors.

No. B) A perfect competition is also product related; therefore, the demand for labors may be in huge numbers.

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